UBS identifies promising opportunities in dividend-paying real estate stocks

Are you looking to tap into the current opportunity in the real estate market? According to UBS, the recent downturn in the real estate market has created a promising landscape for long-term investors. While the market has seen a 4.7% decline in 2024, there are signs of a potential rebound in the years to come.

UBS analyst Jonathan Woloshin highlights the uncertainties facing the commercial real estate (CRE) market, including the impact of interest rates and the refinancing of $2 trillion in debt between 2024 and 2026. Despite these challenges, there are indicators of a stronger market ahead, with diminishing supply in key sectors like retail, multifamily, and industrial real estate.

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Additionally, there is significant capital ready to be deployed in the private equity market, with approximately $33.5 billion in new CRE funds announced. Real estate investment trusts (REITs) are also offering attractive dividends, with an average yield of 4.2%. Woloshin advises investors to focus on quality investments with a strong management team, solid balance sheet, and sustainable dividend coverage.

Two REITs that stand out in Woloshin’s list are Prologis and Alexandria Real Estate Equities. Despite facing challenges this year, Prologis remains the world’s largest owner of industrial properties, with a diverse operating model that offers multiple avenues for value creation. Meanwhile, Alexandria Real Estate Equities focuses on developing large campuses for life science companies, boasting a strong balance sheet and well-diversified tenant base.

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For investors with liquidity and a multi-year time horizon, the CRE and REIT market offer compelling risk-adjusted rewards. As Woloshin aptly notes, “Investors need to remember that no one rings a bell at the bottom.” By staying patient and focusing on quality investments, there are plenty of opportunities to capitalize on in the real estate market.

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