As Real Estate Investors Targets Medical Property, Watch 'DRN'

The pandemic obviously did no favors for commercial real estate. That tide is turning, with the Direxion Daily MSCI Real Estate Bull 3X ETF (DRN) up almost 40% year-to-date.

One place real estate investors are turning to for potential opportunities is medical buildings. With the need for healthcare a constant in the marketplace, medical office buildings have withstood the pandemic despite a move towards telemedicine.

“Medical office buildings emptied out during the pandemic when many patients opted for video appointments and telemedicine rather than in-person visits. That didn’t stop investors from pouring money into these properties,” a Wall Street Journal article noted. “Investors say there are a number of reasons to favor medical offices even as property owners turn more bearish on conventional office buildings, which have been upended by the new popularity of remote work.”

One of the advantages of medical office buildings have been their higher rent revenue. Rent collection have ousted comparable office building revenues in the marketplace.

“Landlords have collected more than 95% of what they are owed, according to data firm Revista LLC. Some office landlords with mediocre property, by comparison, had rent collections lower than 85%, according to market participants,” the WSJ article said further. “Patients are returning to the doctor’s office after in-person visits fell 60% early on in the pandemic, according to a study published by the Commonwealth Fund, a healthcare-research foundation.”

As for DRN, the fund seeks daily investment results equal to 300% of the daily performance of the MSCI US IMI Real Estate 25/50 Index. The index 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 GICS.

DRN Chart

Positive Momentum Building

While the fundamentals look strong as patients begin to return amid a vaccine rollout, technical traders will still want to confirm the positive momentum. The 50-day moving average continues to remain above the 200-day moving average, highlighting the current short-term strength.

A relative strength index (RSI) indicator shows the fund sitting just below overbought levels. Looking at the one-year chart, the index has yet to fall below oversold levels.

DRN Chart

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