“Last year was the largest single vacancy decline for U.S. industrial properties, benefiting REITs,” Rodgers said. “So it’s an appropriate place to be.”
Wilson Magee, director of global real estate at Franklin Templeton, believes that self-storage units and lodgings will benefit from the economic recovery. While there are no self-storage-specific REIT ETFs on the market, the sub-sector is found in diversified REIT ETFs. For instance, RWR has a 7.4% weight in self-storage REITs and 7.0% in hotels.
Additionally, health care picks may be a value play in the REITs category, according to Morningstar. Short-term risk is relatively negated as many health-care REITs have long-term leases, Todd Lukasik, Morningstar REIT analyst, said. Lukasik singled out HCP (NYSE: HCP) and Ventas (NYSE: VTR) as examples of strength. The two companies are among the largest holdings in diversified REIT ETFs. VNQ has a 3.2% weight in both HCP and VTR; IYR has a 5.6% allocation toward HCP and 5.6% in VTR; and RWR includes 3.9% in HCP and 4.0% in VTR.
“So REIT cash flow should continue to grow,” Lukasik said. “Also, tens of millions more people who are joining the ranks of the insured should drive demand.”
For more information on real estate investment trusts, visit our REITs category.