Customize the exposure of your property with a REIT



TThe real sector is the best performing group in the S&P 500 this year, and ALPS Active REIT ETF (NASDAQ: 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 the peak caused by the coronavirus in 2020, some market observers point to the sector with both attractive opportunities and disadvantages.

“The outlook for office REITs is highly uncertain and will likely remain so until we know if there will be a steady shift towards telecommuting – 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, 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. ALPS does not need to maintain large positions in office REITs, and can place capital in more attractive corners of the sector, and these opportunities are indeed being exploited.

“The demand for warehouses / distribution centers appears to be outstripping supply, resulting in a sharp rise in rents,” notes Kastner. “And with house prices skyrocketing amid low rates and de-urbanization, REITs that specialize 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 industry-level opportunities, the macroeconomic environment is currently facilitating the consideration of a fund such as a 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. “With generally still low interest rates coupled with renewed demand for office and retail space, investor searches for profitability and attractive valuations could be a strong tailwind for the sector.”

Other ETF REITs include Schwab US REIT ETF (NYSEArca: SCHH) and Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR)

To learn more about cornerstone strategies, visit our Building Block Channel ETF

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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.


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