While the December 2024 interest rate cut of 25 basis points may be the last until at least September, it is an excellent bet that the federal funds rate will be lower than today’s effective rate of 4.23%, which is already below the long-term average of 4.61%. Investors seeking total return to balance the need for passive income and the desire to add growth to combat inflation may consider commercial real estate investment trusts (REITs) as an option for 2025. REITs own, operate, or finance income-producing real estate. They enable individuals to invest in real estate without owning properties directly. REITs pool funds from investors to purchase and manage a diversified portfolio of real estate assets, including office buildings, apartments, shopping malls, hotels, and warehouses.
We screened our 24/7 Wall St. commercial REIT database to identify solid investment ideas that pay substantial and reliable dividends. We found five companies that are among the best commercial real estate stocks to consider, focusing on REITs and real estate service companies with strong fundamentals, undervaluation, or growth potential. All five are rated Buy at top Wall Street firms we cover here at 24/7 Wall St.
Agree Realty
Agree Realty Corp. (NYSE: ADC) is an $8 billion+ industry leader in the acquisition and development of properties net leased to retailers. This mid-cap stock offers a reliable dividend and strong upside potential. Agree Realty is a publicly traded REIT that acquires and develops properties net-leased to industry-leading, omnichannel retail tenants.
The company’s assets are held by, and all of its operations are conducted directly or indirectly through, the operating partnership of which the company is the sole general partner.
Its portfolio comprises over 2,370 properties in 50 states, totaling approximately 48.8 million square feet of gross leasable area. The company’s portfolio of properties is located in:
- Texas
- Ohio
- Florida
- Michigan
- Illinois
- North Carolina
- New Jersey
- Pennsylvania
- California
- New York
- Georgia
- Virginia
- Connecticut
- Wisconsin
Agree Realty tenants include these companies and more:
- Walmart
- Dollar General
- Tractor Supply
- Best Buy
- Dollar Tree
- TJX Companies
- O’Reilly Auto Parts
- CVS
- Kroger
- Lowe’s
- Hobby Lobby
- Burlington
- Sherwin-Williams
- Sunbelt Rentals
- Wawa
- Home Depot
- TBC
- Gerber Collision
Truist Financial has a Buy rating with an $82 price target.
Alexandria Real Estate Equities
With a hefty yield and a unique niche in the real estate arena, this is an outstanding company trading at a very reasonable valuation. Alexandria Real Estate Equities Inc. (NYSE: ARE) is an owner, operator, and developer of collaborative life science, agricultural technology, and advanced technology mega campuses in AAA innovation cluster locations, including:
- Greater Boston
- San Francisco Bay Area
- New York City
- San Diego
- Seattle
- Maryland
- The Research Triangle
The company, through its venture capital platform, provides strategic capital to life science, agrifoodtech, climate innovation, and technology companies.
Its tenants include:
- Multinational pharmaceutical companies
- Public and private biotechnology companies
- Life science product
- Service and medical device companies
- Digital health
- Technology
- Agtech companies
- Academic and medical research institutions
- United States government research agencies
- Non-profit organizations
- Venture capital firms
The company has a Labspace asset base predominantly concentrated in markets with barriers to entry.
Robert Baird has a Buy rating and a $102 target price.
Federal Realty Investment Trust
Founded in 1962, this REIT’s mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities. While real estate has slowly recovered, demand is still growing, and hard assets are generally considered a prudent investment in times of inflation. Federal Realty Investment Trust (NYSE: FRT) is a recognized leader in the ownership, operation, and redevelopment of high-quality, retail-based properties in major coastal markets, spanning from the District of Columbia to Boston, San Francisco to Los Angeles.
Federal Realty’s mission is to deliver long-term, sustainable growth through investing in densely populated, affluent communities where retail demand exceeds supply.
Its expertise includes creating urban, mixed-use neighborhoods like:
- Santana Row in San Jose, California
- Pike & Rose in North Bethesda, Maryland
- Assembly Row in Somerville, Massachusetts
Federal Realty’s portfolio comprises approximately 3,500 tenants across 27 million square feet of space and 3,100 residential units. Federal Realty has increased its quarterly dividend to its shareholders for 58 consecutive years, the longest record in the REIT industry.
Barclays has assigned an Overweight rating with a price target of $106.
Realty Income
Realty Income Corp. (NYSE: O) is a REIT that invests in free-standing, single-tenant commercial properties. This is an ideal stock for growth and income investors seeking a safer, contrarian investment for the remainder of 2025. Realty Income is an S&P 500 company that provides stockholders with dependable monthly income.
The company acquires and manages freestanding commercial properties that generate rental revenue under long-term net lease agreements with its commercial clients.
It is engaged in a single business activity: leasing property to clients, generally on a net basis. This business activity spans various geographic boundaries and encompasses a range of property types and clients across multiple industries.
The company owns or holds interests in approximately 15,621 properties in:
- All 50 United States
- The United Kingdom
- France
- Germany
- Ireland
- Italy
- Portugal
- Spain
With clients doing business in 89 industries, its property types include: retail, industrial, gaming, and others, such as agriculture and office.
Its primary industry concentrations include:
- Grocery stores
- Convenience stores
- Dollar stores
- Drug stores
- Home improvement stores
- Restaurants
- Quick service
UBS has a Buy rating and a $62 target price.
Simon Property Group
Simon Property Group (NYSE: SPG), a leading real estate company, is a self-administered and self-managed REIT. It owns, develops, and manages premier shopping, dining, entertainment, and mixed-use destinations, primarily consisting of malls, Premium Outlets, and The Mills.
It owns or holds an interest in approximately 196 income-producing properties in the United States, which consist of :
- 93 malls
- 70 Premium Outlets
- 14 Mills
- Six lifestyle centers
- 13 other retail properties in 37 states and Puerto Rico
It also holds an interest in 22 regional, super-regional, and outlet malls in the United States and Asia.
Additionally, it has redevelopment and expansion projects, including the addition of anchors, big-box tenants, and restaurants, underway at properties in North America, Europe, and Asia.
Internationally, the company owns 35 Premium Outlets and Designer Outlet properties, primarily located in Asia, Europe, and Canada. It also has two luxury outlet destinations in Italy.
Piper Sandler has an Overweight rating with a $200 price objective.
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