While the housing market struggles, there are signs that the pain felt in the commercial real estate sector might be leveling off, meaning the good times could continue in REIT exchange traded funds (ETFs).
Kathleen M. Howley for Bloomberg reports that analysts are calling a bottom in the commercial real estate market. As the U.S. economic recovery gains steam, more office space is being snapped up and the trend should continue through 2011. [Real Estate, Retail ETFs Move Higher After Mixed Reports.]
Anton Troianovski for The Wall Street Journal reports that for all of the sector’s improvements, there are still difficulties. A total of $58.3 billion of the commercial-mortgage loans sliced and diced on Wall Street are currently delinquent and the delinquency rate of 8.58% is still nearly twice as high as the year-ago level of 4.8%.
Kevin Grewal for Daily Markets reports that one of the major forces behind the improvements is the stabilization of the credit markets, which have enabled many REITs to refinance debt and issue equity which can be used to pay down debt early or buy more properties at cheap valuations. [Homebuilder ETFs Lose Steam As REITs Gain It.]
The Federal Reserve’s stimulus plan could further goose this market as interest rates are held down to historic lows.
You can find all of the REIT and commercial real estate ETFs in the ETF Analyzer, including these funds. According to the Analyzer, most REIT ETFs are above their long-term trend lines:
- SPDR Dow Jones REIT (NYSEArca: RWR): Malls are 14.6%; office property is 14.3%
- First Trust S&P REIT (NYSEArca: FRI): Malls are 13.9%; office property is 13.1%
- iShares FTSE NAREIT Industrial/Office (NYSEArca: FIO): Office property is 64.5%
- Claymore Wilshire U.S. REIT (NYSEarca: WREI): Malls are 16.3%; office property is 13.2%; hotels are 7.3%
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.