The real sector is the best performing group in the S&P 500 this year, and ALPS Active REIT ETF (REIT) proves how beneficial a selective approach can be, which has grown by about 19.3% in just four months since its inception.
While the real estate sector has long since emerged from its peak caused by the coronavirus in 2020, some market observers point to a sector with both attractive opportunities and weaknesses.
“The outlook for office REITs is highly uncertain and will likely remain so until we know if there will be a steady shift towards teleworking – although the recent trend seems to be that most employees will eventually return to the office.” , by David Kastner of Schwab… “While net debt for the sector is low by historical standards, the cash flow risk puts many REITs in a quandary.”
Easier said than avoiding trouble spots in any sector for exchange-traded stock indices. However, this goal underscores the advantage of active management. IN ALPS The fund does not need to maintain a significant stake in office REITs, and it can channel capital to more attractive corners of the sector, and these opportunities will indeed go away.
“Demand for warehouses / distribution centers appears to be outstripping supply, resulting in skyrocketing rents,” notes Kastner. “And with house prices skyrocketing amid low rates and de-urbanization, REITs specializing in single-family and pre-owned home rentals will benefit – and this is likely to result in higher rents for multiple families.”
In addition to opportunities at the sectoral level, the macroeconomic environment is currently facilitating the consideration of a fund such as REIT… The real estate sector usually performs well at low interest rates. Historically, it has been one of the most efficient sectors in the face of inflation and if the economic recovery continues, tenants will be able to continue to meet their lease obligations.
“If the economy continues to grow rapidly, people get back to work, and interest rates remain low, as the Federal Reserve maintains adaptive monetary policy, the real estate sector can do well,” adds Kastner. “Overall, with interest rates still low, coupled with renewed demand for office and retail space, investors’ search for profitability and attractive valuations could be a strong tailwind for the sector.”
This article first appeared on ETFTrends.com