3 REITs to Watch as Rate Cuts Ignite a Real Estate Super Cycle

Key Points

• REITs are standing on several tailwinds now created by recent Fed cuts into high inflation and high asset prices, where property values could rise higher.
• With higher-than-average dividend yields, the proxy for valuation suggests these property portfolios are cheap.
• Wall Street analysts agree that double-digit upside lies ahead for these names.

After years of underperforming the S&P 500 index, and most especially the technology sector, real estate investment trusts (REITs) are back in the game. With the Federal Reserve now set to lower interest rates for the remainder of 2025 and into 2026, a real super cycle scenario is brewing in the background for investors who know what they are looking for.

The bull case for the real estate sector is different from most others during times of rate cuts. The reason is that these rate cuts aren’t like the ones property prices have experienced in the past; this wave is tied to higher inflation and a slight economic hiccup, with growth not being as robust. In other words, stagflation could be a potential outcome. If 1974 repeats itself, then tangible assets (not so much financial ones) could outperform significantly.

This is where being exposed to property comes into play, just like those already exposed to other tangible assets, such as gold and other metals. Even though REITs are financial assets, their value is directly tied to the property portfolio (and income) they hold. After creating a super cycle watchlist with Realty Income Corp. NYSE: O, Equity Residential NYSE: EQR, and Camden Property Trust NYSE: CPT, this is precisely what investors can expect from each of these companies.

Realty Income Is Your Safe Bet

This REIT has consistently focused on commercial properties and only the top-quality tenants in their space. Leasing their properties to some of the strongest players in the retail and staples sectors, this property portfolio is one of the most stable and predictable ones available.

This is why Realty Income can afford to pay monthly (instead of quarterly) dividends to its shareholders. Speaking of which, at a payout of $3.23 per share and today’s prices, Realty Income’s dividend yield stands at an annualized 5.37% today.

This is not only sufficient to beat inflation rates in the United States, but also to be well above the yields of the Treasury ten-year bond. Now comes the valuation factor, which in real estate can be easily gauged through this very dividend yield (a proxy for the cap rate in physical property). Here is what that says for Realty Income stock.

Because a 5.37% yield is at the top of the range for historical Realty Income yields, investors can somewhat assume that the company’s real estate portfolio may be undervalued. This is also why management has chosen to focus on $66 billion worth of potential acquisitions in 2025, knowing that they can secure not only “cheap” properties but also high yields on their respective rents.

Knowing that these new acquisitions could be set to go up in value, not to mention the value that constant rent creates, Cantor Fitzgerald analyst Richard Anderson now decided to place a $64 per share target on Realty Income, a premium above the consensus of $62.25 and 6.5% upside potential from today’s price as well.

Rate Cuts Hit Equity Residential Most

Because this REIT primarily holds multi-family real estate, it is less cyclical than most, but not as safe as Realty Income. With Equity Residential, investors are trading the ultimate safe portfolio for a bit of additional upside, especially since this portfolio holds properties in areas where construction is scarce (commanding higher rent premiums).

With a return-to-office theme, alongside the locked housing market, tailwinds abound for Equity Residential right now. As the average home price is now just above $500,000 with mortgage rates still stubbornly above 6%, chances are there won’t be much buying from the average citizen (as is the case right now), which means the only alternative is to rent.

This is where multi-family comes into play as a great asset to own. More than just a great asset, its price today translates a $2.77 per share dividend payment into an annualized yield of 4.42% today, also above inflation and government bonds for the most part.

Just as Realty Income, this dividend yield is on the higher end of the historical spectrum, meaning properties may be valued on the cheap side as well. Understanding these dynamics better than anyone, Wall Street analysts have now settled on a consensus price target of $74.32 per share for Equity Residential stock, representing an 18.6% premium above today’s prices.

A More Cyclical Bet for Camden’s Portfolio

This one is very similar to Equity Residential. Still, the main difference is that Camden’s holdings are more focused on the Sun Belt region of the United States, resulting in greater sensitivity to job and population growth in that area. “So far so good” is what investors can deduce about the region, so unless something significant changes, this portfolio is a winner.

This can be considered the riskiest mix of today’s list due to its regional exposure. Still, it is also the one offering the best upside potential if these affordability themes continue across the housing market. Like the other REITs in this list, Camden’s $4.20 payout per share offers shareholders a 4.07% annualized dividend yield.

Like all others, this level is at a historical high, meaning this portfolio is also undervalued and potentially disconnected from what’s really happening in the Sun Belt region.

That’s also why Richard Hightower from Barclays placed a $127 per share price target on Camden Property, above its consensus rating of $121.73 and 23% above today’s current price.