Real estate investment trusts (REITs) are an attractive investment choice for many investors, thanks to the fact that they offer high yields, simple tax rules, and high liquidity. As an investor, you have 12 sectors to pick from when it comes to REIT investing. In this blog post, we focus on the best REIT choices in the four major REIT asset classes. The four major REIT sectors are composed of retail, office, healthcare, and apartment REITs. In this blog post, we explore the best REITs to invest in for each of the top sectors.
The Best REITs in the Retail Sector
Many investors are understandably nervous about investing in the retail REIT asset class. You may be reluctant to invest due to the flurry of reports documenting the mass closure of retail stores and the rise of online shopping. While traditional stores may prove to be a risky choice when it comes to REIT investing, service-based retail, such as cafes, drug stores, restaurants, and theatres, are not vulnerable to the same threat of e-commerce and are continuing to boom.
Realty Income is a REIT that specializes in freestanding, single-tenant commercial property in the retail sector. According to the latest figures, Realty Income currently has 5,326 properties in its portfolio. The majority of Realty Income’s properties are service-based provides, such as FedEx and LA Fitness. Realty Income also has some top tenants, including Walgreens and AMC Theatres, both of which are practically invulnerable to the precarious nature of the retail market in 2018. In addition, Realty Income has an impressive track record, with over 20 years of experience growing dividends for its investors. The corporation currently offers a yield of 4.97%.
Simon Property Group
Malls fall unto A, B, or C classes based on various factors, such as location and the range of services they provide customers. While category B and C malls are struggling, category A malls are still popular among consumers thanks to the diverse range of amenities they offer and their prime locations.
Simon Property Group is one of the best performing REITs in the mall sector and is the largest REIT currently on the market. The corporation own an impressive 230 high-end retail properties in North America and Asia. As one of the best REITs to buy now, Simon Property Group possess a stellar reputation for being able to engage with consumer need and demand and effortlessly weather the storms of the retail sector; they have a reputation for turning their lowest performing stores into service-based retail options that still prove popular in the struggling world of retail. 2018 first quarter results were impressive. The company beat earnings estimates by $0.04.
The Best REITs in the Apartment Sector
As one of the four main REIT sectors, apartment REITs make up approximately 15% of the total REIT Index. Homeownership rates have dropped drastically to 64.2%, lower than what they were in 1994. As such, investing in REITs that specialize in apartment complexes are a smart choice for investors in 2018.
AvalonBay Communities Inc.
AvalonBay Communities Inc. has a reputation for being one of the strongest multifamily REITs on the market. AvalonBay Communities Inc. has repeatedly ranked number one in the category of multifamily REITs in the Online Reputation Assessment™ Power Rankings for three consecutive years in a row (2015-2017). AvalonBay Communities Inc. excel in acquiring, developing, redeveloping, and managing multifamily complexes in primary markets across the US, including California and New York. Since 2010, the company’s Core FFO per share has risen by 117%, compared to the market average of 83% over the same period. In addition, the REIT’s annual dividend has risen to $5.88 per share in 2018, from $3.57 per share in 2010.
UDR Inc. purchases, manages, renovates, and develops multifamily complexes throughout the US. The REIT currently owns 39,454 completed apartment buildings, which span 127 communities. For 2017, UDR Inc. boasted a trailing annual dividend yield of 3.20%. In the REIT’s First Quarter for 2018.
The Best REITs in the Office Sector
Office REITs are a diverse sector, some REITs specialize in unique tenant classes, such as marketing firms or biotech companies. Other REITs hone in on certain property types, from towering skyscrapers to alternative buildings for the modern millennial. According to the FTSE, office REITS produced a dividend yield of 3.17% and a total return of 5.25% for 2017.
City Office REIT
City Office REIT focuses on the acquiring offices in high-growth markets and has expanded its portfolio to double what it was in the past two years. City Office REIT focuses on property in markets that see above average job growth, minimizing investor risk and promising higher returns on investments. City Office REIT produced a 7.5% dividend yield for 2017.
Boston Properties (BXR)
Boston Properties (BXR) is one of the largest owners, managers, and developers of Class A office space in the US. Boston Properties own and manage property in some of the most successful markets in the US, including Los Angeles, New York, and Washington DC. The company continues to see rapid growth. In 2017, the REIT increased their diluted FFO per share from $6.03 to $6.22. They also reported total dividends of $3.05 per share, an increase of $0.05 per share from the previous year.
The Best REITs in the Healthcare Sector
Healthcare is also a major REIT asset class. Healthcare REITs own and manage a range of healthcare properties, from skilled nursing facilities to senior care homes. While the healthcare market has been viewed as volatile and subject to losses historically, thanks to an aging population REITs that specialize in senior care facilities are proving to be lucrative.
A leading REIT in the healthcare sector, Ventas, Inc. owns a sizeable portfolio of over 1,200 healthcare facilities in some of the most profitable markets. Ventas, Inc. has also experienced extensive growth in recent years. They have seen an 8% compound annual dividend increase since 2001. Ventas, Inc. is also one of the best REITs to invest in if you are looking for a budget investment. Shares are trading at $50.56, offering a P/FFO multiple of 12.2x (compared to the market average of 15x). The company’s shares are currently yielding at 6.2%.
LTC Properties predominantly focuses on long-term healthcare facilities and senior housing. This makes the REIT a wise investment thanks to the growing number of Baby Boomers who will soon be in need of care facilities in the later years of their retirements. As one of the smaller Healthcare REITs on the market, LTC Properties is worthy of your attention thanks to the strength of its balance sheet. The REIT has seen its dividends grow year by year. FFO per diluted common share was $0.75 for the 2018 first quarter, compared to $0.78 for 2017.
The Best REITs on the Market
REIT investing offers a number of benefits. REITs typically have low barriers to entry and offer high yields, and high liquidity. REITs are also a great option if you are looking to diversify your commercial real estate portfolio. By focusing on the strongest REITs for each of the most popular asset classes, you will maximize your profits and minimize your investment risk.
Interested REIT investing? You can find out more about the pros and cons of REIT investing and how to invest in our in-depth blog post on the topic.