Commercial Real Estate ETFs: Long or Short? | ETF Trends

Commercial real estate and the sector’s related exchange traded funds (ETFs) are in a potentially perilous position. That leaves just one question: is it a buying opportunity, or is it time to go short?

Some investors have such a doom-and-gloom feeling about what lies ahead for commercial real estate that they’re considering whether shorting the sector is worth it. After all, storefronts lie vacant, vacancies are up in many major cities and office space sits empty.

Matt Krantz for USA Today explains that the commercial real estate sector is easy to short with an ETF. But here’s a word of caution for you: REITs pay out a vast majority of their earnings as periodic dividends. If a REIT ETF is paying out 9%, and many are right now, you will be required to cough up those 9% dividends to the party from whom you borrowed the shares while you are shorting the ETF. Ouch! Keep in mind, this is only when shorting a regular ETF.

There are also short ETFs available for this market, as well. If you still want in, bear in mind that leveraged and inverse ETFs need to be monitored closely, and shorting is not for everyone.

  • ProShares UltraShort Real Estate (SRS): down 73.7% year-to-date