With the U.S. economy chugging along, commercial real estate investment trusts and sector-related exchange traded funds may be in a sweet spot.
The current economic expansion rate could is robust enough to fuel tenant and investor demand for property but not so overpowering that it could fuel speculative investments and overheat the market, writes Andrew J. Nelson is Chief Economist at USA for Colliers International, for CNBC.
All the right factors are fueling property demand. For instance, the housing market is recovering as home sales, housing starts and pricing are steadily on the rise. The jobs market is expanding, with more gains in 2014 than any year this century. More Americans are earning, cutting down debt and spending more. Additionally, the credit markets are in good standing, with rates and inflation both low.
“All of these factors are driving demand for all types of real estate, which means absorption is strong and growing for all sectors, even if it is below long-term averages, especially for a growth period,” Nelson said.
Consequently, investors who want some exposure to the commercial REITs space can consider a broad, diversified ETF option, such as the Vanguard REIT ETF (NYSEArca: VNQ), iShares Dow Jones US Real Estate Index Fund (NYSEArca: IYR), SPDR Dow Jones REIT ETF (NYSEArca: RWR) and Schwab US REIT ETF (NYSEArca: SCHH).