JPMorgan Turns Contrarian on Interest Rates, Upgrades 3 REITs

JPMorgan Chase has issued a vote of confidence in U.S. real estate. On Thursday, September 24, the bank upgraded three real estate investment trusts (REITs) from Neutral to Overweight.

The timing is contrarian. The 10-year Treasury yield sits near 5.11%, and the Real Estate Select Sector SPDR ETF (NYSE:XLRE) is a notable laggard, up just 3.15% year to date.

Still, with this vote, JPMorgan’s bet reflects a stance that the risk has been over-penalized, fully discounted, and that the sector is primed for a rebound.

Three Firms, One Call

The spread—demographic healthcare, distressed retail, industrial growth—signals an institutional call on mispriced sector-wide multiples rather than isolated stock picking.

Welltower Inc. (NYSE:WELL) was lifted to Overweight with a $260 price target. The healthcare and senior-housing landlord benefits from what JPMorgan sees as durable demographic demand from aging Baby Boomers—a tailwind largely independent of debt-market swings.

Welltower’s most recent quarter reinforced the case. Revenue of $3.54 billion beat the $3.44 billion estimate, even as EPS of $0.61 missed the $0.6388 consensus.

The Macerich Co. (NYSE:MAC), the enclosed-mall operator, was raised to Overweight with a $26 target, implying roughly 14.9% upside from its prior close. The stock’s beta of 2.06 shows volatility and suggests the price could move quickly.

EastGroup Properties Inc. (NYSE:EGP) is an industrial REIT concentrated in Sun Belt logistics corridors. The firm received an upgrade with a $231 target, or around 14.2% upside. Its debt-to-equity ratio of 0.45 gives it an unusually strong buffer against refinancing pressure.

Data-Driven Contrarianism

Mainstream investors often treat equity REITs as bond proxies. When Treasury yields climb, the logic dictates that dividend spreads compress, and capital rotates into risk-free paper.

Standard models compound the concern with higher refinancing costs, narrower acquisition spreads, and elevated discount rates that drag down net asset values. The result has been mechanical selling across benchmarks such as XLRE and VNQ, both of which lost more than 8% over the last month and through the Fed’s first hike since July 2023.

However, evidence suggests this reflexive selling might be misplaced.  Glenn Mueller, Professor Emeritus at the Franklin L. Burns School of Real Estate and Construction Management, studied the historic data alongside Keith R. Pauley in the 1990s.

Their research established that equity REIT prices show very low sensitivity to borrowing rates, averaging a modest -0.153 correlation with 10-year Treasury shifts during rising-rate periods.

“The spontaneous relationships between interest-rate changes and REIT price changes are very weak,” they noted.

Decades later, Nareit’s data only reinforces the point, as REITs posted positive total returns in 78% of months with rising Treasury yields between 1992 and mid-2025. Since rising rate regimes often accompany broader macroeconomic expansion, this dynamic makes JP Morgan’s thesis contrarian to consensus, yet validated by long-run empirical data.

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