President Donald Trump hasn't been shy in demanding that the Federal Reserve cut interest rates, and unsurprisingly, his choice to succeed Fed Chair Jerome Powell is potentially on the same page. Kevin Warsh has echoed the President's calls for lower rates in recent months, and federal funds traders now forecast an 81% chance of a rate cut by this summer, with a 45% chance of one in April, before Warsh is even sworn in.
After almost four years of tight monetary policy, there are indications that U.S. companies can look forward to lower borrowing costs. That's great news for real estate investment trusts (REITs), which benefit from lower interest rates in three ways.
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These companies, which follow tax-related rules that require them to pay 90% of their net income back to shareholders as dividends, typically offer high yields that attract income investors who might otherwise be left out in the cold by falling Treasury yields. Their valuations can also rise because their future cash flows are discounted using the 10-year Treasury yield as a benchmark, so as the latter falls, REIT valuations rise. Finally, lower borrowing costs naturally boost REITs, since they fund their long-term operations through long-duration debt that can be refinanced at more favorable terms when interest rates fall.
You can see REITs' tendency to outperform by comparing their returns during the last era of prolonged low rates against those of the S&P 500. From June 2009 to November 2015, when the federal funds rate never exceeded 0.21%, the Vanguard Real Estate Index Fund ETF (VNQ 0.27%), an exchange-traded fund (ETF) that offers broad exposure to U.S. equity REITs, handily beat the S&P 500's total return.
Data by YCharts.
Still, not all REITs will thrive amid falling rates, while others will be standout performers. Here are three opportunities in the REIT universe to consider buying now.
1. Realty Income
Founded in 1969 and headquartered in Vancouver, Canada, Realty Income (O +0.59%) is the sixth-largest REIT globally, with properties in nine countries totaling $61 billion in value. Its clients include Lowe's, Chipotle, Sainsbury's, and Walmart.
NYSE: O
Key Data Points
As of Q3 2025, the company has announced 112 consecutive quarterly increases to its dividend. And with earnings growing 17% year over year last quarter, this streak looks highly likely to continue. Realty Income pays a monthly dividend yielding 5.2% today, well above the S&P 500 average of 1.16%.
2. Prologis
San Francisco-based Prologis (PLD 1.83%) is a REIT operating in 20 countries, with $215 billion in assets under management. Its dividend growth from 2019 to 2024 outpaced the entire REIT sector by 2-to-1, and on Feb. 20, 2025, its management approved another 5% dividend hike. This timing suggests that another dividend increase announcement could be just days away.
NYSE: PLD
Key Data Points
In the meantime, the company offers a dividend yield of 3%, nearly triple the S&P 500 average. Given that it grew earnings by 9.5% year over year in the last quarter, an imminent dividend increase could be in that neighborhood.
3. Vanguard Real Estate Index Fund ETF
The aforementioned Vanguard Real Estate Index Fund ETF counts 152 REIT stocks among its holdings, providing broad-based exposure to the industry. Designed to provide high income and moderate long-term capital appreciation, the fund tracks the performance of a benchmark, the MSCI U.S. Investable Market Real Estate 25/50 Index.
Its yield stands at 3.82% today, over triple the S&P 500 average. Being passively managed, it has a low expense ratio of 0.13%, compared to the industry average of 0.48%.
NYSEMKT: VNQ
Key Data Points
Year to date, the fund is up just 2%, which suggests Wall Street hasn't warmed to REITs even as signs abound that lower rates are coming. Since its inception in September 2004, the ETF has averaged an annual return of 7.41%. Yet it has a history of significantly outperforming in times of low rates. It returned over 200% from June 2009 to November 2015, the last prolonged era of cheap money.
For investors seeking income and stability amid a return to low rates, these three REIT opportunities are buys.
