In 2026, REITs and real estate services stocks are layered in terms of relative value. Federal Realty Investment Trust (FRT.US) is favored by JP Morgan for its capital cycling.

Wall Street financial giant JPMorgan Chase made significant adjustments to the ratings of nine popular investment targets in its outlook for REITs (Real Estate Investment Trusts) and real estate services companies in 2026. Among them, seven investment targets saw their ratings downgraded, while the ratings of the other two were upgraded. Anthony Paolone, a senior analyst from JPMorgan, wrote in the research report: "The increase in downgrades mainly reflects the increasing likelihood of a soft landing for the U.S. economy and the expected continuation of the Fed's rate cuts cycle. The distribution of ratings within our coverage is becoming more segmented, especially because these ratings are relative to each other." In JPMorgan's 2026 outlook report, the company believes that the REITs and real estate services industry as a whole is entering an environment of moderate growth and limited same-store sales growth. The performance of individual stocks is more likely to be driven by relative valuation and balance sheet elasticity, rather than by "overall industry fundamentals rising across the board." Therefore, they downgraded more REITs and real estate service investment targets from "hold/neutral" to reflect reduced relative opportunities (slower growth, valuation already reflecting nearly all positives, or difficulty in achieving growth due to strong recent gains) and emphasized that the high number of downgrades also reflects a more "segmented" distribution of ratings within their coverage, and that ratings are relative. Therefore, the latest round of concentrated rating changes by JPMorgan for REITs/real estate service stocks is essentially a re-segmentation of "relative rating + relative risk-return" relative value. REITs/real estate service companies that were downgraded: JPMorgan stated that the investment rating for Realty Income (O.US) was downgraded from "neutral" to "reduce" mainly because "its large scale makes it difficult to point to profit growth above the industry average in the coming years." The rating for Public Storage (PSA.US) was downgraded from "hold" to "neutral" mainly because the company's expected improvement in core growth rates "is likely to be stretched over a long timeline, and not in a straight line." The rating for Welltower (WELL.US) was downgraded from "hold" to "neutral" purely as a "short-term stock price judgment, rather than driven by any deterioration in internal or external growth prospects of the company," according to JPMorgan. The rating for Regency Centers (REG.US) was also downgraded from "hold" to "neutral" despite this being simply a "temporary stock price trend judgment," as they still believe REG has one of the best platforms in the overall REIT sector and optimistic long-term growth prospects. The rating for Kennedy Wilson (KW.US) was downgraded from "neutral" to "reduce," as JPMorgan believes that the upside potential from the pending privatization bid proposed by CEO William McMorrow and Fairfax Financial Holdings is very limited. The rating for UDR (UDR.US) was downgraded from "neutral" to "reduce," and the rating for SmartStop (SMA.US) was adjusted from "hold" to "neutral." Investment targets that received an upgraded rating from JPMorgan: JPMorgan upgraded the rating for Federal Realty Investment Trust (FRT.US) from "neutral" to "hold," and the rating for Camden Property Trust (CPT.US) was upgraded from "reduce" to "neutral." For Federal Realty Investment Trust, JPMorgan believes that its capital recycling strategy to move funds from mature assets to higher-quality retail assets (especially in higher income/growth secondary markets and dominant shopping center assets) is becoming more effective, improving visibility of growth in 2026; and this approach aligns with their preference for "visible external growth" (acquisitions/development pipeline). The logic behind JPMorgan's upgrade of Camden Property Trust to "neutral" is that the key comparison is with UDR - JPMorgan gives Camden stronger balance sheet flexibility for buybacks and development/redevelopment in 2026, significantly improving relative risk-return, at least no longer requiring a "reduce" position.