Real estate investment trusts and the related ETFs, broadly speaking, are being painted with the same tarnished brush this year as market participants fret about the fates of commercial and retail estate owners in the wake of the coronavirus.
However, the selloff in the broader REIT space could be opening the door to opportunity with the Pacer Benchmark Industrial Real Estate SCTR ETF (NYSEArca: INDS).
INDS offers investors exposure to US companies that generate the majority of their revenue from industrial REITs that are part of the e-commerce distribution and logistics network. INDS provides exposure to the growing e-commerce space by investing in data center and distribution center REITs, along with higher quality retail real estate.
Why INDS Matters
One obvious theme emerging in the wake of COVID-19 is that brick-and-mortar retailers are imperiled while their online rivals are thriving and those online retailers need warehouse space.
“Warehouses, once overlooked by investors as grimy relics of America’s industrial past, have seen a surge of demand in recent years from both tenants and buyers as they have become key cogs for growing e-commerce and logistics businesses,” reports Business Insider. “That interest has only grown amid the pandemic, which has appeared to accelerate a years-long shift away from traditional brick-and-mortar shopping to online commerce.”
While some analysts are speculating that industrial REITs could be confounded by weakening consumer confidence on par with retail ETFs, other data points suggest INDS is positioned to endure retail weakness. In fact, thanks to the e-commerce boom, the ETF is poised to thrive as shoppers move online.
The COVID-19 pandemic is forcing a slew of malls and retail store closures across the world. In the U.S., many non-essential retailers are temporarily closed and while traditional grocery stores remain open, many shoppers are opting to order from home and not risk contracting the coronavirus by venturing outside.
Adding to the case for INDS is that industrial REITs are now being viewed as one of the safest corners in the REIT universe.
“It’s the safest harbor of all the property investment types right now and what’s making it that way is that it’s still a growing industry,” said Mark Kolsrud, senior vice president at the real estate services firm Colliers, who focuses on industrial deals in the Midwest and handled the sale of the Minnesota and Colorado properties to Link, in an interview with Business Insider.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.