In this article, we will be taking a look at the 14 best real estate and realty stocks to buy according to analysts. To skip our detailed analysis of the real estate sector, you can go directly to see the 5 Best Real Estate and Realty Stocks To Buy According to Analysts.
Housing Versus Retail: Where to Invest in Real Estate?
The real estate sector has been battling with elevated mortgage rates this year, resulting in the US housing market suffering from a lack of demand among the population. However, some may expect the struggles of the real estate sector to abate as the year progresses, especially as many financial professionals begin to analyze the state of US real estate markets. Several spaces within the real estate sector are under-invested in, leaving the arena free and open for investors looking to make a real estate play.
On February 29, Carly Trip, the Head of Investments at Nuveen Real Estate, joined CNBC’s “Closing Bell Overtime” to discuss the state of the US real estate markets. Here’s what she had to say:
“On the residential market, it’s kind of like no new news, however what’s interesting is that the consumer is really starting to explain their tolerance for mortgage rates. In December we saw really strong numbers, mortgage rates had come in about 50 basis points, bouncing around six and a half. As they have suddenly come up since then and hover above 7%, consumers do not like that. And so we’re seeing the results of that in pending home sales. So we expect that that is not gonna improve, inventory will remain low until rates come around 6%, in which case your cost to own versus cost to rent margin really starts to shrink.”
Despite the above observations, Tripp noted that other areas in the real estate markets are doing better. Here’s what she said:
“Retail’s doing amazingly well. So retail has been the underdog of the last decade. And what we’re seeing in our centres is increased activity, a lot of demand, increased sales. The consumer is obviously very resilient and strong. That is accomodating to retail spending, 80% of retail sales do involve a physical store which is a positive for our centres. And not only that, there’s no new supply added to retail. Over the last five years, about a 130 million square feet of retail has been converted to other uses, so it’s really been under-invested in. So the outlook for retail is very, very strong.”
Industrial Real Estate Performs Well
Similarly, for the industrial real estate side, Tripp had positive insights to share. Here are some of the comments she made:
“Industrial’s been incredible. It has performed exactly as real estate should perform. Income has outpaced inflation, right, real estate is expected to be an inflation hedge, that’s why it’s such a great diversifier to a portfolio. And so we continue to see incredibly strong demand for industrial. Supply has slowed, that was the concern pre-pandemic. However, due to lack of construction spending, lack of financing just generally speaking, bottlenecks in the construction system, we expect that demand is just gonna continue to flow. E-commerce spending is not going anywhere.
Considering these highlights, while the residential side of real estate seems to be still struggling in 2024, that does not mean all real estate should be avoided this year. Several other areas within the sector remain ripe for investment. As such, we have compiled a list of some of the best real estate stocks to invest in, including names such as KE Holdings Inc (NYSE:BEKE), Crown Castle International Corp. (NYSE:CCI), and Realty Income Corporation (NYSE:O). These include some of the best real estate stocks with dividends and some of the best real estate stocks to buy for the long term.
Aerial view of a large urban cityscape showcasing a major real estate development.
Our Methodology
We have selected the stocks for our list of the best real estate and realty stocks to buy using estimated upside potential statistics for each stock from TipRanks. The stocks are ranked based on their upside potential, from the lowest to the highest figure. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Best Real Estate and Realty Stocks To Buy According to Analysts
14. Extra Space Storage, Inc. (NYSE:EXR)
Average Analyst Price Target: $149.78
Upside Potential: 4.48%
Number of Hedge Fund Holders: 26
Extra Space Storage, Inc. (NYSE:EXR) is a self-storage real estate investment trust (REIT) company based in Salt Lake City, Utah. The company owns and operates 3,651 self-storage stores in 42 states and Washington, D.C.
As of this January, Goldman Sachs analyst Caitlin Burrows maintains a Buy rating and a $187 price target on Extra Space Storage, Inc. (NYSE:EXR).
There were 26 hedge funds long Extra Space Storage, Inc. (NYSE:EXR) in the fourth quarter, with a total stake value of $330.8 million.
Diamond Hill Capital mentioned Extra Space Storage, Inc. (NYSE:EXR) in its third-quarter 2023 investor letter:
“Following a dip in share price after Q2 earnings and rising interest rates, we had an opportunity to make an initial investment in Extra Space Storage Inc. (NYSE:EXR). Despite facing near-term challenges like normalizing street rents and occupancy rates after two years of robust demand, as well as the recent merger with Life Storage, we believe EXR is well positioned for long-term growth of its intrinsic value. It boasts an impressive franchise and perhaps the industry’s best operating platform. The Life Storage acquisition broadens its real estate portfolio and presents more opportunities for growth. While the company faces some near-term headwinds, the recent sell-off created an opportunity for us to acquire shares in this high-quality franchise at a very reasonable price.”
Like KE Holdings Inc (NYSE:BEKE), Crown Castle International Corp. (NYSE:CCI), and Realty Income Corporation (NYSE:O), Extra Space Storage, Inc. (NYSE:EXR) is among the best real estate and realty stocks to buy now.
13. Crown Castle International Corp. (NYSE:CCI)
Average Analyst Price Target: $118.54
Upside Potential: 6.74%
Number of Hedge Fund Holders: 45
This January, Ari Klein at BMO Capital placed a Market Perform rating and a $110 price target on Crown Castle International Corp. (NYSE:CCI).
Crown Castle International Corp. (NYSE:CCI) is a telecom tower REIT based in Houston, Texas. The company owns, operates, and leases over 40,000 cell towers and about 90,000 route miles of fiber supporting small cells and fiber solutions across US markets and is among the best real estate stocks to buy.
We saw 45 hedge funds long Crown Castle International Corp. (NYSE:CCI) in the fourth quarter, with a total stake value of $1.6 billion.
Fisher Asset Management was the largest shareholder in Crown Castle International Corp. (NYSE:CCI) at the end of the fourth quarter, holding 4.6 million shares in the company.
12. Weyerhaeuser Company (NYSE:WY)
Average Analyst Price Target: $37.50
Upside Potential: 7.42%
Number of Hedge Fund Holders: 30
A total of 30 hedge funds were long Weyerhaeuser Company (NYSE:WY) in the fourth quarter, with a total stake value of $255.9 million.
Weyerhaeuser Company (NYSE:WY) is a timber REIT based in Seatlle, Washington. The company is among the world’s largest private owners of timberlands, owning and operating about 11 million acres of timberlands in the US.
On January 29, RBC Capital reiterated an Outperform rating and a $39 price target on Weyerhaeuser Company (NYSE:WY).
11. Invitation Homes Inc. (NYSE:INVH)
Average Analyst Price Target: $37.14
Upside Potential: 7.53%
Number of Hedge Fund Holders: 25
D1 Capital Partners was the most prominent shareholder in Invitation Homes Inc. (NYSE:INVH) at the end of the fourth quarter, holding 7.5 million shares in the company.
Invitation Homes Inc. (NYSE:INVH) is a single-family residential REIT based in Dallas, Texas. The company leases single-family homes to meet changing lifestyle demands and provide access to high-quality, updated homes in close proximity to good schools and workplaces.
RBC Capital reiterated an Outperform rating and a $36 price target on February 15 on Invitation Homes Inc. (NYSE:INVH).
Our hedge fund data for the fourth quarter shows 25 hedge funds long Invitation Homes Inc. (NYSE:INVH), with a total stake value of $497.8 million.
Here’s what Baron Funds said about Invitation Homes Inc. (NYSE:INVH) in its third-quarter 2023 investor letter:
“Following strong second quarter results, we modestly increased our investments in single-family rental REITs Invitation Homes, Inc. (NYSE:INVH). Demand conditions for rental homes are attractive due to the sharp decline in home affordability; the propensity to rent in order to avoid mortgage down payments, avoid higher monthly mortgage costs, and maintain flexibility; and the stronger demand for home rentals in suburbs rather than apartment rentals in cities. Rising construction costs are limiting the supply of single-family rental homes in the U.S. housing market. This limited inventory combined with strong demand is leading to robust rent growth.
Invitation Homes have an opportunity to partially offset the impact of inflation given that their in-place annual leases are significantly below market rents. Valuations are compelling at mid-5% capitalization rates, and we believe the shares are currently valued at a discount to our assessment of net asset value. We remain mindful that expense headwinds and slower top-line growth could weigh on growth later in 2023 and 2024. We will continue to closely monitor business developments and will adjust our exposures accordingly.”
10. Prologis, Inc. (NYSE:PLD)
Average Analyst Price Target: $144.94
Upside Potential: 7.68%
Number of Hedge Fund Holders: 46
Prologis, Inc. (NYSE:PLD) is an industrial REIT based in San Francisco, California. The company is a global leader in logistics real estate with a focus on high-barrier, high-growth markets.
In total, 46 hedge funds were long Prologis, Inc. (NYSE:PLD) in the fourth quarter, with a total stake value of $678.3 million.
As of February 16, RBC Capital maintains an Outperform rating and a $145 price target on Prologis, Inc. (NYSE:PLD).
9. AvalonBay Communities, Inc. (NYSE:AVB)
Average Analyst Price Target: $194.70
Upside Potential: 9.3%
Number of Hedge Fund Holders: 29
AvalonBay Communities, Inc. (NYSE:AVB) had 29 hedge funds long its stock in the fourth quarter, with a total stake value of $234.7 million.
Morgan Stanley upgraded AvalonBay Communities, Inc. (NYSE:AVB) from Equal Weight to Overweight on February 26, alongside placing a $191.5 piece target on the stock.
AvalonBay Communities, Inc. (NYSE:AVB) is a multi-family residential REIT based in Arlington, Virginia. The company owns or holds a direct or indirect ownership interest in 299 apartment communities containing 90,669 apartment homes in 12 states and the District of Columbia.
At the end of the fourth quarter, AEW Capital Management was the largest shareholder in AvalonBay Communities, Inc. (NYSE:AVB), holding 769,788 shares in the company.
Baron Funds mentioned AvalonBay Communities, Inc. (NYSE:AVB) in its third-quarter 2023 investor letter:
“In the third quarter, we maintained our exposure to apartment REIT AvalonBay Communities, Inc. (NYSE:AVB). We believe public valuations remain discounted relative to the private market. Tenant demand remains healthy and rent growth has modestly improved since the first quarter of 2023. Rental apartments continue to benefit from the current homeownership affordability challenges. Multi-family REITs provide partial inflation protection to offset rising costs due to leases that can be reset at higher rents, in some cases, annually. We continue to closely monitor new supply deliveries and job losses in key geographic markets.”
8. Mid America Apartment Communities Inc (NYSE:MAA)
Average Analyst Price Target: $140.89
Upside Potential: 10.39%
Number of Hedge Fund Holders: 23
Mid America Apartment Communities Inc (NYSE:MAA) is another multi-family residential REIT on our list of the best real estate stocks. It is based in Germantown, Tennessee, and delivers full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, and development of quality apartment communities.
Goldman Sachs reinstated a Buy rating and a $149 price target on Mid America Apartment Communities Inc (NYSE:MAA) on February 22.
Mid America Apartment Communities Inc (NYSE:MAA) was found in the 13F holdings of 23 hedge funds in the fourth quarter, with a total stake value of $524.3 million.
This is what Diamond Hill Capital said about Mid America Apartment Communities Inc (NYSE:MAA) in its third-quarter 2023 investor letter:
“Mid-America Apartment Communities, Inc. (NYSE:MAA) is a multifamily-focused REIT which owns, operates, acquires and selectively develops apartment communities, primarily in the Southeast and Southwest US. We have owned MAA in the past and chose to reinitiate a position as concerns about slowing internal growth and headwinds from new supply have pushed the share price down. MAA is a strong franchise with a respected management team, an excellent balance sheet and a well-located portfolio in the Sun Belt. We anticipate the supply concerns will prove a near-term headwind, while its competitive advantages should make it an attractive long-term investment.”
7. Alexandria Real Estate Equities, Inc. (NYSE:ARE)
Average Analyst Price Target: $142
Upside Potential: 14.27%
Number of Hedge Fund Holders: 31
Alexandria Real Estate Equities, Inc. (NYSE:ARE) was spotted in the portfolios of 31 hedge funds in the fourth quarter, with a total stake value of $214.2 million.
On January 31, Wedbush reiterated an Outperform rating and a $140 price target on Alexandria Real Estate Equities, Inc. (NYSE:ARE).
Alexandria Real Estate Equities, Inc. (NYSE:ARE) is an office REIT based in Pasadena, California. It owns, operates, and develops collaborate life science, agtech, and advanced technology mega campuses.
Baron Funds said the following about Alexandria Real Estate Equities, Inc. (NYSE:ARE) in its third-quarter 2023 investor letter:
“Alexandria Real Estate Equities, Inc. (ARE) is the life science industry leader and sole publicly traded life science pure-play REIT. At its current discounted valuation, we believe concerns about competitive supply and distress for some of the company’s biotechnology and health care tenants are overblown and sufficiently discounted in the company’s valuation. We believe the management team has assembled a desirable real estate portfolio, enjoys a leading market share position in its geographic markets, and has solid expectations for long-term demand-driven growth.”
6. American Tower Corporation (NYSE:AMT)
Average Analyst Price Target: $231.93
Upside Potential: 14.95%
Number of Hedge Fund Holders: 56
American Tower Corporation (NYSE:AMT) is another telecom tower REIT on our list of the best real estate stocks to buy. It is based in Boston, Massachusetts, and is an independent owner, operator, and developer of multitenant communications real estate.
An Overweight rating and a $230 price target were maintained on American Tower Corporation (NYSE:AMT) on February 28 by JPMorgan analysts.
We saw 56 hedge funds long American Tower Corporation (NYSE:AMT) in the fourth quarter, with a total stake value of $3.2 billion.
Baron Funds mentioned American Tower Corporation (NYSE:AMT) in its fourth-quarter 2023 investor letter:
“Early in 2023, we sold the majority of our position in American Tower Corporation (NYSE:AMT), a global operator of over 200,000 wireless towers, and even further reduced our modest position in the third quarter of 2023. We had concluded in late 2022 and early 2023 that growth expectations were too high given forthcoming headwinds from significantly higher financing costs (20%-plus exposure to floating rate debt), upcoming debt maturities, continued payment shortfalls from a key tenant in India, foreign exchange headwinds, and a reduction in mobile carrier capital expenditures.
Following a sharp decline in American Tower’s shares in the first nine months of 2023, we began rebuilding our position because we believed that the company’s shares had become more attractively valued, growth headwinds were better understood, and the potential monetization event of its India business would ultimately be value accretive to its business. Further, we believe that 2023 will mark the trough in earnings growth for American Tower and growth should reaccelerate in the next few years.”
Like KE Holdings Inc (NYSE:BEKE), Crown Castle International Corp. (NYSE:CCI), and Realty Income Corporation (NYSE:O), American Tower Corporation (NYSE:AMT) is among the best real estate stocks to buy now.
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Disclosure: None. 14 Best Real Estate and Realty Stocks To Buy According to Analysts is originally published on Insider Monkey.