3 REITs That May Win in a Higher Interest Rate Environment

Key Points

• A narrow spread between a REIT's dividend yield and Treasury yields can signal an attractive entry point ahead of potential rate declines.
• Realty Income, American Tower, and Public Storage each show distinct strengths, including stable leases, AI-driven demand, and resilient storage operations, despite high rates.
• Investors should still examine each REIT's debt maturity schedule, since refinancing at higher rates could offset gains from growth or favorable pricing.

Investors may be inclined to pick real estate investment trusts (REITs) based largely on the most impressive dividend yield. However, some of the most compelling options may not necessarily offer the best distributions; rather, they may be those that can build rental income, asset value, and cash flow at a faster pace than their borrowing costs.

In a high-interest-rate environment where Treasury yields rise, REITs contend with higher financing costs as well as investor expectations of improved returns. It can be helpful to compare a REIT's dividend yield with the yield on a (nearly) risk-free Treasury bond.

Narrower spread premiums relative to Treasury rates may present a strong entry point for investors, as they can signal that REITs have been aggressively repriced to assume the worst on interest rates. If the Federal Reserve is approaching its terminal rate, Treasury yields may be on the cusp of a decline—which could trigger a reset in REITs and lead to capital appreciation. The REITs below may be best positioned to benefit in this scenario.

O: Stable Income With Potential to Acquire Assets

A monthly dividend REIT with a three-decade history of distributions, Realty Income Corp. NYSE: O has a dividend yield of about 6.01%. At the same time, the 10-year Treasury yield reached about 5.23% as of early October 2026.

Realty Income oversees long-term leases with well-established tenants, a combination that tends to produce predictable and stable rental income. On the other hand, this structure does not make Realty Income a natural beneficiary of increases in interest rates, as such increases can mean that the company's leases lose their purchasing power over time.

When it can offer a larger yield premium to Treasuries, Realty Income may be in a better position to acquire assets in an accretive manner. Even still, it recently boosted its investment volume guidance, assuming $10 billion over the course of 2026.

Increasing liquidity thanks to strong occupancy metrics and an improving investment-grade tenant profile may also help in this regard.

Analysts are divided, with just over half offering a rating of Hold—perhaps to see how the interest rate scenario evolves—and nearly all of the remainder suggesting a Buy.

AMT: High Demand for Cell Tower Infrastructure and Escalation Clauses

American Tower Corp. NYSE: AMT is one of the largest cell tower REITs globally, but it, too, has experienced valuation compression due to high interest rates that pressure cash-flow businesses. The major benefit this company sees thanks to its portfolio is the strong demand from AI infrastructure that has permeated the market.

Couple this with consistent and predictable revenue growth thanks to contractual escalators in its leases, plus an expanding international portfolio that can capitalize on the weakness of the dollar, and investors may find a discrepancy between AMT's potential and its share price trajectory (down about 4% so far this year).

Changes in financing costs tend not to have too much of an impact on mobile carriers and their need to provide coverage and capacity.

On the other hand, AMT's holdings may be subject to higher valuations than some other properties.

An inflection point may be in store that could help reverse AMT's overall declines this year and catalyze the predicted 18% upside potential; 90% of analysts call AMT a Buy.

PSA: Low Operating Costs, Higher Margins, and Repricing Potential

Storage properties may be a compelling choice for REIT investments in a high-interest-rate environment because they tend to have low maintenance costs, a diversified customer base that may be more resilient, and the ability to adjust unit pricing when tenants either renew their leases or move out.

Public Storage NYSE: PSA has been trending in a positive direction with regard to operations based on improving occupancy, move-in rents, and more. An external acquisition of National Storage Affiliates and additional property purchases totaling in the hundreds of millions year to date (YTD) add to the firm's appeal, especially if it is able to maintain margins. Nonetheless, analysts agree by a ratio of two to one that PSA shares are a Hold.

Before selecting any REIT for investment while interest rates are high, it's important to consider the company's debt maturity schedule to assess how much of its debt must be refinanced in the near term. Impressive growth and a purchase price that may be more attractive thanks to a narrow Treasury spread will only go so far if the REIT is in a disadvantaged position the next time it has to refinance debt at a higher rate.