Best REITs to invest in commercial real estate

Top 3 REITs

Boston Properties (BXP)

Boston Properties is the largest publicly traded developer, owner and manager of Class A office properties — high-quality buildings that command high rents — in the U.S.

The company has a portfolio of 201 properties totaling 52.8 million square feet. Boston Properties generates long-term recurring rental revenue as its portfolio has a weighted average remaining lease term of 7.8 years.

Management maintains a strong focus on gateway regions with long-term rent growth prospects. Its top three markets by net operating income are Boston (34%), New York (28%) and San Francisco (20%).

Paying quarterly dividends of 98 cents per share, the REIT currently offers an annual yield of 3.3%.

Last week, Mizuho analyst Vikram Malhotra upgraded Boston Properties from ‘neutral’ to ‘buy,’ naming the stock his top pick in the office REIT space. His price target of $135 is roughly 10% above current levels.

Prologis (PLD)

Warehouses may not seem like exciting pieces of property, but investors of Prologis aren’t complaining. The warehouse-focused REIT has delivered a total return — stock price appreciation plus dividends earned — of more than 200% over the past five years.

Logistics facilities like warehouses are critical to our economy, particularly as consumers have embraced online shopping.

Prologis is a leading player in the field. It has investments in 4,675 logistics facilities that total nearly 1 billion square feet. They are leased to 5,800 customers across two major categories: business-to-business and retail/online fulfillment.

The REIT’s top tenants include names like Amazon, FedEx, DHL and UPS — companies that are firmly entrenched during this era of e-commerce.

Prologis pays quarterly dividends of 79 cents per share, giving it an annual yield of 1.9%.

On Monday, Raymond James analyst William Crow reiterated a ‘strong buy’ rating on Prologis, noting the sector’s potential to deliver free cash flow and increasing dividends. He also raised his price target on the shares to $190 — around 14% above where the stock sits today.

Public Storage (PSA)

Public Storage is a leading player in the self-storage business. It owns more than 2,800 self-storage facilities in 39 states totaling 200 million rentable square feet.

The company has been around for 50 years, and it’s still growing. From 2010 to 2021, the REIT’s same-store net operating income increased by 80%.

The business has served income investors well, providing dividends every single quarter since 1981. Today, the REIT has a quarterly dividend rate of $2.00 per share, translating to an annual yield of just over 2%.

The stock has also picked up momentum, gaining about 45% over the past 12 months.

More returns could be on the horizon. JPMorgan analyst Michael Mueller recently raised his price target on Public Storage from $385 to $434 while maintaining an ‘overweight’ rating. With the stock trading just below $400 right now, Mueller’s target implies potential upside of almost 10%.