While people don’t seem too interested in the residential and commercial real estate markets, real estate investment trust (REITs) ETFs have been doing quite well.
Timothy Strauts, an ETF analyst for Morningstar, remarked that “REIT ETFs are leading the S&P by a healthy margin, outperforming the S&P over the last 12 months,” writes Sheryl Nance-Nash for Daily Finance. U.S. ETF Real Estate was up 22% year-to-date through Sept. 21. Since the real estate markets haven’t tanked again, real estate prices are starting to come back to more reasonable levels.
REITs are securities that sell like a stock on an exchange and invest in real estate property, both residential and commercial, or mortgages. The investment class has some special tax considerations and often provides high dividend yields. Investors may also like investing in REITs because of their liquid nature as compared to physical properties.
The largest risk with REITs will be that someone will be there to continue to pay the rents. Ward of Lucien, Stirling & Gray, adds that “if the commercial side of the market begins to weaken, then that should over time begin to weaken the yields further, to the point that shareholders no longer find value and sell their shares.”
According to Chip Brian for SmarTrend, the top five companies in the office REITs industry are Lexington Realty Trust (NYSE: LXP), Digital Realty Trust (NYSE: DLR), Corporate Office Properties Trust (NYSE: OFC), SL Green Realty (NYSE: SLG) and followed by Kilroy Realty (NYSE: KRC).
Michael Barnello, president and CEO of LaSalle Hotel Properties, commented that REITs have “better access to cash, can close quickly and are typically comfortable with the results,” writes Patrick Mayock for Hotel News Now. Bornello also remarked that the industry is driven by “GDP, job growth, corporate profits and consumer confidence.”
- SPDR Dow Jones REIT (NYSEArca: RWR): up 9.6% in last three months
- First Trust S&P REIT (NYSEArca: FRI): up 10.3% in last three months
- iShares FTSE NAREIT Residential (NYSEArca: REZ): up 9.8% in last three months
- Vanguard REIT ETF (NYSEArca: VNQ): up 9.5% in last three months
Max Chen contributed to this article.