There's an old saying in real estate that the three most important things are "location, location, location." Right now, one of the best locations in the country is the Sun Belt region. The area covers 13 states across the southern portion of the U.S., which boast above-average employment and population growth, driven by better business climates, weather, and affordability compared to the rest of the country.
Several real estate investment trusts (REITs) focus exclusively on the Sun Belt region, putting them in the right location to continue growing. Three that should be on investors' radars are Camden Property Trust (NYSE: CPT), Cousins Properties (NYSE: CUZ), and EastGroup Properties (NYSE: EGP).
Focused on fast-growing population centers
Camden Property Trust is a residential REIT focused on owning apartment communities. The REIT's operating portfolio currently consists of 167 communities with 56,850 apartment homes across 14 major U.S. markets. It has a heavy presence in the Sun Belt region, with a large portion of its net operating income (NOI) coming from markets in Texas, Florida, Georgia, North Carolina, and Arizona.
The company focuses on some of the fastest-growing markets in the country. It owns properties in 13 of the 20 markets expected to experience the most population growth through 2022 and 11 of the 20 regions with the fastest projected employment growth.
With so many people moving into these cities, it will drive housing demand. That should enable Camden Property to continue expanding its portfolio via development projects. The REIT currently has 10 development communities under construction and six more projects in the pipeline. It has a top-tier balance sheet to finance these developments and invest in renovations of existing communities. These investments should grow its funds from operations FFO in the coming years, which should support continued dividend increases.
Focused on fast-growing employment centers
Cousins Properties is an office REIT focused on the Sun Belt region. The company currently operates 20 million square feet of office space across major cities in the South. Its current portfolio owns properties in 6 of the 10 fastest-growing markets by total migration. Cousins also concentrates on owning Class A office properties, which are in high demand by tenants, driving faster rent growth.
Many large corporations are relocating or expanding their presence in the Sun Belt. That's driving demand for new office space and has enabled Cousins to grow its portfolio via development projects. The company currently has five developments underway covering 1.5 million square feet of space, 77% of which it has already leased to tenants. On top of that, it's built an extensive land bank that could support an additional 5.2 million square feet of office development. That gives Cousins ample room to grow in the coming years.
Focused on fast-growing commercial markets
EastGroup Properties is an industrial REIT focused on major Sun Belt markets like Florida, Texas, Arizona, California, and North Carolina. The company owns 47 million square feet of multi-tenant distribution facilities in 13 of the 15 fastest-growing markets. It concentrates on owning location-critical facilities like last-mile distribution centers.
EastGroup Properties has many growth drivers. It invests in targeted development projects, primarily in business park settings, enabling it to leverage strong locations in key markets. It also acquires value-add properties that enable it to earn higher returns by investing capital in improving good locations across its existing markets.
The REIT currently has 16 development and value-add projects underway in 10 cities covering more than 2.7 million square feet of space. As these and future projects come online, they should enable EastGroup to continue growing its portfolio, FFO, and dividend.
Focused on a red-hot region
The Sun Belt region should benefit from outsized growth in the coming years as more people and businesses move south in favor of better weather, business climates, and affordability. That should enable REITs focused on this region to grow their portfolios faster than others, since they should have more opportunities to invest in higher-return development and redevelopment projects.
Because of that, growth-focused investors should consider adding Sun Belt-focused REITs like Camden Property, Cousins Properties, and EastGroup Properties to their portfolio, since they have some of the brightest futures in the sector.