Social distancing measures have put the hurt on commercial real estate, but bullish traders are hoping for a push given the deployment of a COVID-19 vaccine. They will want to keep on an eye on leveraged real estate ETFs like the Direxion Daily MSCI Real Est Bear 3X ETF (NYSEArca: DRV).

Direxion ETFs help traders:

  • Magnify short-term perspective with daily 3X leverage
  • Go where there’s an opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile – with liquidity to trade through rapidly changing markets

The MSCI US IMI Real Estate 25/50 Index (M2CXVGD) is designed to measure the performance of the large-, mid- and small-capitalization segments of the U.S. equity universe that are classified in the real estate sector as per the Global Industry Classification Standard (GICS).

On the other side of the index, bearish traders can opt for the the Direxion Daily MSCI Real Est Bull 3X ETF (NYSEArca: DRN):

DRV Chart

On the flip side, DRV is showing some signs of life:

DRN Chart

Challenging Times Ahead for Commercial Property

Getting exposure to commercial property via ETFs gave investors an opportunity to get involved in a subsector of real estate without having to purchase the property itself. Nowadays, commercial property is facing challenging times with a pandemic in tow, but hopefully, a global deployment of a vaccine can reverse the sector’s fortunes.

“Even as Covid-19 cases surge world-wide, the arrival of viable vaccines holds the promise of a return to something resembling normality by the middle of next year. But the commercial real-estate sector may never get back to normal, and that could spell trouble for banks,” a Wall Street Journal article said. “Many banks are concentrated in and dependent on commercial property lending. Banks hold half of all commercial real-estate loans. The 5,000 or so U.S. community banks, with about a third of total assets, are two to three times as concentrated in commercial real-estate lending as the approximately 30 larger banks.”

“Problems in commercial real estate can hurt banks in two ways,” the article added further. “Losses on existing loans can damage earnings directly, and a correction can reduce future lending volumes, impairing an important driver of earnings. Based on what we know now, things don’t look good. Neiman Marcus and at least 28 other major retailers have filed for bankruptcy. Hotel occupancy is down 32%. The Journal reported last month that world-wide airline capacity in October was down 58% from 2019. Apartment rent levels have collapsed 15% to 25% in large cities including New York, San Francisco, Boston and Seattle. Suburban shopping malls have been devastated.”

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