The stock market has seesawed into bear territory a few times this year. While it's inching its way upward again after a steep drop in mid-June, the volatility is far from over. A lot of investors are sitting on the sidelines, but I'm personally using this time to diversify my portfolio and invest in high-quality stocks to hold for the long term.

Three fantastic real estate investment trusts (REITs) that I'm watching closely are Cousins Properties (CUZ 0.38%), Equity Residential (EQR 0.17%), and Digital Realty Trust (DLR 0.29%). Despite all three companies being down 7% or more over the last year, they still have massive opportunities for growth over the long haul. Here's a closer look at why these red-hot stocks should be on your radar.

1. A red-hot opportunity for office space in the South

The sunnier southern region of the United States, now dubbed the sun belt market, has become the place to work and live over the past decade. It continues to see record population and employment growth as people look for a better quality of life or seek new job opportunities. 

Countless corporations are expanding or moving their headquarters to the South to cities like Austin, Charlotte, or Tampa. That is great news for Cousins Properties, the only 100% sun belt market-focused office REIT. It owns just under 2 million square feet of class A office space in eight strategic markets across the sun belt.

The office industry as a whole is battling major headwinds as the pandemic continues to reshape the future of office space. However, Cousins Properties seems to be facing these challenges with stride. Its portfolio is 90.6% leased, and its leasing momentum is picking up pace, with 324,000 square feet leased in the first quarter of 2022.

Its Q1 2022 performance metrics are slightly lower than 2021 levels, which explains why its stock price is down 24% so far this year. However, if you think long term, looking at the opportunity Cousins has to rebound given its exposure to the hottest job markets in the country, its favorable pricing of eight times its FFO makes it a smoking buy right now. Plus, its dividend yield is over 4%. 

2. City living is sizzling again

City living lost its luster during the pandemic. Residents fled high-cost and high-density markets like Seattle, New York, and San Francisco in droves in 2020 and 2021. This hit Equity Residential, one of the premier class-A apartment operators in major metro markets, hard. But thanks to higher vaccination rates and easing restrictions surrounding COVID-19, city living is heating up once again.

Equity Residential has shown tremendous quarter-over-quarter growth, a clear sign that demand for its high-end class-A apartments is back in a big way. Its occupancy is at 96.9%, and its blended lease rate, which includes new and renewing leases, is up 14% as of May 2022. The REIT's key metrics, including revenues, funds from operation (FFO), and net operating income, are all up year over year.

Despite this tremendous comeback, the company is still down close to 20%, which means it's trading for a very favorable price of 12 times its FFO. Its dividend is around 3.4% right now, which may not be as high as many other REITs right now but it's still double the dividend return of the S&P 500.

3. Data infrastructure is just heating up

Helping to store, aggregate, and transmit data, data centers are the backbone of our digital economy. And demand for data centers is heating up. It's expected that the global data center industry will see a compound annual growth rate (CAGR) of 13.8% per year over the next decade.

Given Digital Realty Trust is one of the two remaining data-center REITs investors can choose from, it's easy to see why this is a red-hot long-term play. The REIT has interest or ownership in 291 data centers across 50 metros on six continents currently, but it's rapidly expanding. It recently announced a joint venture with Mivne with plans to add a collocation and communication hub in Israel and expand its presence in the Mediterranean. It is also in the process of acquiring Teraco, the largest data center operator in South Africa.

Its financial position remains healthy and its performance strong, but general market volatility has pushed prices down 24% year to date. It's trading at a favorable 13 times its FFO and paying a 3.6% dividend return. As an added bonus for investors, future dividend increases are likely. The company has raised its dividends consistently for the past 12 years.