Real estate investment trusts and sector-related exchange traded funds have been a standout segment of the U.S. markets this year as falling interest rates and bets on the future of e-commerce helped prop up this attractive yield-generating segment.
Among the best performing REITs ETFs year-to-date, the Pacer Benchmark Industrial Real Estate SCTR ETF (NYSEArca: INDS) increased 30.3%, Pacer Benchmark Data & Infrastructure Real Estate SCTR Strategy (NYSEArca: SRVR) advanced 28.4%, Real Estate Select Sector SPDR Fund (NYSEArca: XLRE) rose 22.4% and iShares Cohen & Steers Realty Majors (NYSEArca: ICF) gained 21.8%.
A quarter of the 32 companies in the S&P 500 real-estate sector were hovering around their highest level in at least a year, and the sector is the second best performer in the index so far this year, falling just behind technology stocks, the Wall Street Journal reports.
REITs have attracted greater attention when interest rates are low as the real estate investment trusts own property and pay steady dividends. Among the best performing sub-segments of the REITs space, real estate related to e-commerce or warehouses have stood out.
Industrial real-estate investment trusts that own and operate warehouses have strengthened to their highest levels since at least before the financial crisis. Market watchers view this REITs segment as an indirect way to bet on the future of retail or the growth of online commerce as such warehouses are where the billions of dollars in goods are stored and processed for online giants like Amazon.com and JD.com, among others.
Nevertheless, the bet on the future of e-commerce is just the icing on the cake as most investors look to the REITs sector for its attractive yields in a low-rate environment.
Expectations for an interest rate cut out of the Federal Reserve has ramped up in recent weeks, with Wall Street betting on a July rate cut if not at its upcoming meeting this week. The Fed has been hinting at a looser monetary policy in light of ongoing growth fears due to an escalating trade war, notably between the U.S. and China, that threatens to weaken the global economy.
For more information on real estate investment trusts, visit our REITs category.