The U.S. real estate market was already undergoing a normalization process in 2025, after exhibiting volatility during the prior two years. Fed’s 3 consecutive rate cuts at the back end of 2025 fueled further motivation for investors. Declining mortgage rates, along with attractive valuations, present a compelling case across select verticals. On January 2, Blackstone’s Global Head of Real Estate, Nadeem Meghji, also shared his opinions on current real estate valuations. On a relative basis, Meghji expects a further rally as the valuations are sitting just 7% above their lows.
On December 18, Morgan Stanley shared its 2026 outlook for the real estate market. The firm noted that more than the macroeconomic backdrop, it is the sector-specific and asset-level drivers that are controlling the dynamics. Such factors are expected to remain dominant for the next couple of years. The firm expects a greater level of transaction activity amid demand-supply imbalance in the market, along with availability of credit, motivated sellers, and engaged buyers.
Conventional real estate investments are characterized by high entry barriers due to a large amount of lump-sum outlays, lack of liquidity, and expertise needed in active property management. This keeps real estate markets limited to individuals with significant experience, investable resources, and access to credit. However, real estate investment trusts (REITs) now make it very convenient for retail investors to gain exposure to a diverse set of real estate segments. Investors motivated by frequent income payments and access to unique property types should look no further.
On December 9, Fitch Ratings shared a neutral 2026 outlook for U.S. equity REITs, citing their financial discipline and encouraging fundamentals. The rating agency highlighted that most of the REITs are currently trading at a discount to their respective net asset values (NAVs). Moreover, as of the writing of its report, Fitch didn’t expect any material impact on the sector fundamentals from government shutdown or tariffs.
With that background, let’s explore our 15 most favored real estate investment trusts according to Hedge Funds.
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Our Methodology
To identify stocks for this article, we began by screening U.S.-listed REITs having market capitalizations above $2 billion. We then added a filter to exclude REITs with share prices below $5 to avoid penny stocks. Also, we only shortlisted stocks with at least 5% upside potential according to TipRanks consensus.
In the final part of the screening, we identified the number of hedge funds that held positions in these REIT shares as of the end of the third quarter of 2025. Finally, we selected 15 REITs with the highest number of hedge funds holding stakes and ranked them in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
15. Independence Realty Trust (NYSE:IRT)
Sector/Industry: Real Estate Investment Trust (Residential)
Share Price: $17.26
Potential Upside: 18.4%
Number of Hedge Fund Holders: 27
Independence Realty Trust (NYSE:IRT) is one of the most favored real estate investment trusts according to Hedge Funds.
On January 9, Citizens JMP analyst Aaron Hecht maintained his Outperform rating on Independence Realty Trust (NYSE:IRT), while lowering his estimated target price from $25 to $22.
Hecht anticipates an inflection point in lease rates during 2026, due to the expected slowdown in deliveries that will result in improvement of supply-side conditions in the market. However, he expects core funds from operations (FFO) during the next couple of years to remain under pressure. This is primarily due to the continued effects of last year’s oversupply of new apartments witnessed in Sunbelt areas, which kept rental growth highly timid. Despite the downward revision, his target price forecasts still offer an upside potential of 27.5% to investors.
Ami Probandt from UBS also maintained a bullish view on Independence Realty Trust (NYSE:IRT), assigning a Buy rating to the stock on January 8. She raised her price target from $19 to $20, which yields an upside of almost 16%.
Probandt attributed her stance to the macroeconomic backdrop, easing supply-side conditions, and cheap valuations for REITs. She expects a turnaround for REITs during the coming year, with an expectation of 9%-11% total returns.
Independence Realty Trust (NYSE:IRT) is a self-managed REIT that acquires and manages multifamily apartment communities to generate optimal risk-adjusted returns. They target areas surrounding employment & retail centers, and schools across the expanding non-gateway U.S. market. The company aims to deliver a strong return on capital to investors in the form of dividends and capital gains.
14. Kimco Realty Corporation (NYSE:KIM)
Sector/Industry: Real Estate Investment Trust (Retail)
Share Price: $21.06
Potential Upside: 12.2%
Number of Hedge Fund Holders: 27
Kimco Realty Corporation (NYSE:KIM) is one of the most favored real estate investment trusts according to Hedge Funds.
On January 13, Barclays analyst Richard Hightower reiterated his optimism for Kimco Realty Corporation (NYSE:KIM). He assigned an Overweight rating to the stock and lowered his target price from $27 to $25. Despite the revision, he still sees an upside of around 19%.
Hightower’s rating is part of Barclays’ broader adjustments to their 2026 outlook for real estate investment trusts. The firm still holds a Neutral stance towards REITs but expects positivity in apartments, single-family, and storage rentals.
On January 8, Michael Goldsmith from UBS reaffirmed his favorable outlook for Kimco Realty Corporation (NYSE:KIM). He assigned a Buy rating to the stock while lowering his target price estimates from $30 to $26.
Goldsmith’s revised estimates still lead to a 23.5% upside potential, backed by positive forecasts for healthcare, shopping centers, and coastal apartments. He expects bullish catalysts for REITs to emerge during the second half of 2026, with a more suitable macroeconomic and political backdrop.
Kimco Realty Corporation (NYSE:KIM) owns, operates, and develops mixed-use properties, as well as high-end open-air grocery-anchored retail properties. The company’s portfolio is heavily concentrated across suburban areas of metropolitan markets, such as Sun Belt cities and coastal markets with high barriers to entry.
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