** Morningstar says Australian real estate sector is not immune to potential economic impact of U.S. tariffs

** The investment research firm says U.S. tariffs could potentially dampen Australia's business confidence and consumer spending, and hence have a bearing on tenants' leasing decisions

** "Tariffs could pull back Australia's economic growth, but we do not envisage a recession. Even if there is one, it is likely to be short-lived. Potential monetary and fiscal stimulus could also offset some of the damage" — Morningstar

** Morningstar says development-driven companies like Lendlease Group LLC.AX, Charter Hall Group CHC.AX and Goodman Group GMG.AX may suffer project delays if business confidence wanes, while REITs' income is relatively secure due to multiyear leases

** Dexus DXS.AX and GPT Group GPT.AX are the investment research firm's top picks

** Real estate stocks .AXRE down 6.9% YTD

(Reporting by Sherin Sunny in Bengaluru)

((Sherin.Sunny@thomsonreuters.com))