It’s been a challenging time for the real estate investment trust (REIT) market in 2023.

Higher interest rates make it much more expensive to service debt. Investors are demanding higher yields on their stocks, which pushes down share prices. And lower share prices, in turn, make it harder for REITs to issue new equity to fund additional property purchases.

Adding to these challenges, the economy appears to be heading toward troubled waters. Particular worries are pooling around certain pockets of commercial real estate such as offices, retail, and medical facilities.

Putting all these pieces together, thoughtful investors may want to avoid three REITs now as their share prices have a lot further to fall in coming months.

Medical Properties Trust (MPW)

Medical Properties Trust (NYSE:MPW) is a REIT focused on owning hospitals in the U.S. and several overseas markets.

Investors used to love Medical Properties Trust for its large dividend. However, following a series of financial struggles among MPW’s largest tenants, the company’s cash flows and profitability came under fire.

Second quarter results were particularly bad, with the firm swinging to a surprise operating loss. Given its huge debt load, this is worrisome. Additionally, Medical Property Trust recently cut its dividend nearly in half.

In August, a Wall Street Journal report highlighted regulatory concerns around the company. Analysts who have long been skeptical of MPW’s accounting continue to raise pointed questions about the firm’s transparency and business arrangements. All this makes MPW stock far too dangerous to own today.

Plymouth Industrial (PLYM)

Plymouth Industrial (NYSE:PLYM) is a small REIT focused on the industrial properties market. In recent years, Plymouth has been highly successful, growing from $49 million of revenues in 2018 to an estimated $200 million this year.

Also, industrial properties have been a strong category. The pandemic exposed the risk of long supply lines and far-flung manufacturing facilities. With the rise of near-shoring and the relocation of strategic manufacturing to the U.S., such as for semiconductors, it has given the industrial category a strong tailwind.

However, while industrial is a strong niche within REITs, it’s still not immune from economic stress. Namely, higher interest rates make it more expensive to get capital and pay interest on existing debt. And, a recession would slow down industrial activity fairly dramatically.

Recently, the largest industrial REIT, Prologis (NYSE:PLD), has plunged to 52-week lows as a result of these headwinds. Plymouth, by contrast, has been stronger with its shares still in the green for the year. Over time, I expect the selling to catch up to Plymouth as the whole industrial REIT category declines in the face of economic challenges.

Digital Realty Trust (DLR)

On its face, the idea of owning a data center REIT is appealing. Data is the new oil, as the adage goes, and thus the data landlords like Digital Realty Trust (NYSE:DLR) should offer attractive returns, right?

And yet, on closer inspection, the outlook isn’t nearly as bright. At its core, Digital Realty provides third-party services for companies that want to host their servers and computing needs off-site.

However, the large tech companies have increasingly built their own corporate-run data centers rather than outsourcing it to a third party.

As organic growth slowed, DLR turned to a series of increasingly expensive acquisitions to keep key metrics rising. But, that spending spree has come home to roost. Now, soaring interest rates make it more expensive to refinance the company’s numerous debts.

Research shop Hedgeye named DLR stock one of its top bearish REIT positions earlier this year. They believe the company will have to cut its dividend given the interest rate environment. With that in mind, it makes little sense for DLR stock to be up so much year-to-date (YTD). Investors should sell the rally now.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.