With the pandemic pushing for more work-from-home initiatives by employers, commercial real estate may have fallen out of favor, but it could be making a comeback.
According to a Wall Street Journal article, a renewed appetite for commercial real estate may be developing.
“Investors purchased a record amount of commercial real estate in the third quarter, defying warnings that the Covid-19 pandemic would erode these property values and starve the industry of cash,” the article said. “Instead, purchases of apartment buildings, life-science labs and industrial properties, which serve as e-commerce distribution centers, rocketed commercial sales to more than $193 billion in the quarter. That is up 19% compared with the same three months in 2019, before the pandemic, and the biggest quarter for commercial property sales ever, according to data firm Real Capital Analytics.”
The article noted that strong sales in specific sectors within the first nine months of this year were enough to take up the slack for a drop in sales for office buildings and shopping centers. This goes against the norm where office buildings and shopping center sales usually do the heavy lifting in commercial real estate sales.
“Coming out of Covid, we’re actually seeing an acceleration of fundamentals across a handful of sectors and that’s really driving investor attention,” said Nadeem Meghji, the head of real estate Americas for investment company Blackstone Inc.
A Balanced Approach to Real Estate
Removing concentration risk can be of benefit when markets go awry, which can make an equal-weight strategy an ideal option. Invesco offers a number of ETF products that cater to an equal-weight strategy, including real estate with the Invesco S&P 500® Equal Wt Real Estt ETF (EWRE).
EWRE seeks to track the investment results (before fees and expenses) of the S&P 500® Equal Weight Real Estate Index (the “underlying index”). The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.
The underlying index is composed of all of the components of the S&P 500® Real Estate Index, an index that contains the common stocks of all companies included in the S&P 500® Index that are classified as members of the real estate sector, as defined according to the Global Industry Classification Standard (“GICS”). With an equal-weight index, investors get a nice balance of real estate names without one particular stock dominating the rest.
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