Three REITs Worth Your Attention in Today's Interest Rate Environment

Why REITs Are Bouncing Back

Real estate investment trusts (REITs) have regained investor momentum following a challenging 2022-2023 period. These vehicles—which acquire properties, generate rental income, and distribute at least 90% of taxable earnings to shareholders—were previously under pressure from rising interest rates. Higher borrowing costs made property acquisition more expensive, while attractive alternatives like Treasury bills and CDs diminished their appeal.

The landscape shifted dramatically when the Federal Reserve implemented six consecutive rate cuts through 2024 and 2025. This pivot makes REITs significantly more attractive compared to fixed-income competitors. For income-focused investors, now represents an opportune window before valuation multiples expand as capital rushes back into the sector.

The Case for Realty Income: Scale Meets Stability

Realty Income (NYSE: O) operates as one of the world’s most substantial REITs, managing over 15,500 commercial properties spanning the U.S. and Europe. Its tenant roster emphasizes recession-resistant retailers—7-Eleven, Dollar General, and Walgreens—providing earnings predictability across economic cycles.

The company maintains a triple-net lease model where tenants cover maintenance, insurance, and property taxes. This structure generates dependable cash flows measured by adjusted funds from operations (AFFO). Recent performance demonstrates resilience: a 98.7% occupancy rate in the latest quarter reflects the company’s ability to weather tenant challenges. Despite some weaker operators reducing their footprints, stronger tenants expanded, maintaining occupancy above 96% since its 1994 IPO.

Realty Income projects 2025 AFFO per share of $4.25-$4.27, growing 1%-2% annually. Its monthly dividend payment (forward yield 5.3%) gets supported comfortably by these projections, with 132 consecutive annual payout increases underscoring management’s commitment. Trading at roughly 14 times trailing AFFO per share, the valuation appears reasonable for conservative income investors.

Vici Properties: Entertainment Tenants, Inflation Protection

Vici Properties (NYSE: VICI) takes a different approach by focusing on experiential real estate—93 casinos, resorts, and entertainment venues across North America. Tenants like Caesar’s Entertainment, MGM Resorts, and Penn Entertainment operate in cyclical industries, making Vici’s 100% occupancy rate since its 2018 IPO particularly noteworthy.

The secret lies in multi-decade leases indexed to the Consumer Price Index (CPI). This mechanism automatically adjusts rents upward with inflation, protecting Vici’s revenue streams and dividend sustainability. Like Realty Income, Vici employs triple-net lease economics, shifting operating burdens to tenants.

Annual dividend increases have continued consistently since going public. The company anticipates 2025 AFFO reaching $2.36-$2.37 per share, representing 4%-5% growth, which comfortably covers its $1.80 forward dividend rate (6.1% yield). At $29 per share, valuation sits at approximately 16 times trailing AFFO, suggesting room for appreciation.

Digital Realty: Positioning for Cloud and AI Expansion

Digital Realty Trust (NYSE: DLR) operates 300+ data centers serving over 5,000 customers across 50+ metropolitan areas. Its customer base includes more than half the Fortune 500, including IBM, Oracle, and Meta.

Recent years brought intentional portfolio reshaping—divesting lower-growth legacy data centers while emphasizing hyperscale properties aligned with cloud infrastructure, artificial intelligence (AI), and high-performance computing (HPC) expansion. During this transition, AFFO declined and dividend growth paused, pressured by higher interest expenses, elevated operating costs, and currency headwinds.

The trajectory should normalize as Digital Realty completes strategic divestitures, inflation moderates, and interest rate pressures ease. Management projects constant-currency core FFO of $7.25-$7.30 per share for 2025, an 8%-9% increase covering its $4.88 forward dividend rate (3% yield). Occupancy is expected to expand 100-200 basis points from 2024’s 82.9%, indicating growing demand.

This positioning makes Digital Realty a balanced income generator coupled with secular growth exposure—less volatile than pure-play AI stocks while capturing infrastructure trends.

The Broader REITs Picture

The convergence of lower interest rates and secular demand drivers—cloud adoption, AI deployment, consumer spending normalization—creates a compelling backdrop for REIT valuations. These three REITs represent different sectors (retail, entertainment, data infrastructure) yet share operational excellence, distribution sustainability, and upside potential before valuation re-rating accelerates.