Got $1,000? 3 Inflation-Resistant Real Estate Investments to Make

So you have $1,000 that you want to invest somewhere that will withstand inflation? A great way to take advantage of this opportunity is to think long-term about how you can grow that money in this inflationary cycle and those to come.

Identifying great companies and then sticking with them is key to building wealth in this and every economic cycle, and real estate investing has a lot to offer. This is where real estate investment trusts (REITs) come in.

Most REITs own and operate income-producing real estate and pass on the majority of their taxable income and tax liability to shareholders. They’re a great vehicle for unlocking the upside potential of all types of real estate, and can often hedge against inflation by raising rents on their properties, especially if they have a tenant base that’s itself fairly inflation-resistant.

Here are three examples in three different industry segments, each of which would be a good choice for someone looking to invest $1,000 and let it sit to generate passive income and capital appreciation for years to come.

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Alexandria Real Estate Stocks

Alexandria Real Estate Stocks (NYSE: ARE) is a major owner and operator of laboratory and associated office space in the thriving life sciences research and development communities in markets such as Boston, San Diego, San Francisco, New York City, the North Carolina Research Triangle and Bethesda, Maryland.

Despite being a member of the office sector, this REIT’s clients are businesses that do not readily lend themselves to remote work. For example, Alexandria’s lineup, with some 700 tenants, includes a who’s who of big pharma, including the two leading makers of COVID vaccines, Pfizer and Modern. Indeed, the latter will have Alexandria as its lessor for its new corporate and research and development (R&D) headquarters in Cambridge, Massachusetts.

Alexandria’s clients tend to be well-heeled, so they can pay the rent even if it goes up. Revenue will also increase in the coming years as the Company adds approximately 25 million square feet of new rentable space in various stages of development. That’s in addition to the 64 million square feet of revenue-generating space the REIT already has.

real estate income

The ability to pass on rising costs is key to a company’s ability to fight inflation. Net-lease retail REITs fit this bill particularly well, requiring tenants to pay taxes, insurance, and maintenance costs even as they rise. Combine that with a rock-solid roster of tenants in major companies and a long list of steadily increasing shareholder payouts, and you get real estate income (NYSE:O) — one of the most solid members of the REIT world.

Realty Income has more than 650 tenants spread across its approximately 11,000 properties across the US, with a few in the UK and Spain. Among the largest customers are Dollar General, Dollar Tree family dollars, 7-Eleven, Walgreens and FedEx.

These are the types of businesses that are reluctant to relocate and typically sign long-term leases with built-in rent increases. And that helps Realty Income continue to pay dividends every month without exception for more than 50 years.

PLD Total Return Level data from YCharts.

prologue

prologue (NYSE:PLD) is the largest of the industrial REITs, providing critical logistics and warehousing space to approximately 5,800 tenants through its portfolio of approximately 1 billion square feet of wholly and partially owned real estate in high-growth markets in 19 countries.

Amazon, home depot, and FedEx Top the list of key tenants that Prologis identifies as two key areas of focus: business-to-business and retail/online fulfillment. The logistics facilities these businesses need are now closer to home due to COVID-19 driving e-commerce demand and global supply chain disruptions, which in turn are driving a new emphasis on “just in case” storage space close to home create for large corporations, of paramount importance of almost every variety.

Hamid Moghadam, chairman and chief executive officer of Prologis, made headlines last fall when he said America’s warehouse space was basically sold out. His company’s just-released report for the fourth quarter of 2021 states that the Prologis properties were 98.2% occupied at the end of the year and in Moghadam’s words: “Demand for our 1 billion square foot global portfolio shows no signs of slowing, and we are ideally positioned to meet our customers’ most important real estate needs.”

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