As is often the case, high interest weighed on the real estate sector this year. The S&P Select Real Estate Index is higher by 7.61% year to date, but that trails the S&P 500 by a wide margin.
Additionally, that gauge is higher by 10.48% over the past month — a period in which chatter has escalated that the Federal Reserve could potentially pare interest rates multiple times next year. That scrutiny is warranted. But it doesn’t imply investors should ignore REITs and ETFs such as the WisdomTree New Economy Real Estate Fund (WTRE).
In fact, due to its unique approach to the real estate sector, WTRE could be one of the more attractive avenues for REIT access in 2024. The ETF follows the CenterSquare New Economy Real Estate Index. The fund is a refresh of a previous WisdomTree ETF and will turn two years old in February in current form.
Why Real Estate ETF WTRE Matters Today
As its name implies, WTRE focuses on REITs with exposure to new economy themes. Those include cell towers, data centers, healthcare REITs, industrial warehouses for e-commerce use and other tech-related properties.
That construction is relevant to investors for multiple reasons. First, it implies that WTRE offers exposure to the REIT segments with the strongest long-term growth prospects. Second, WTRE’s reduced dependence on traditional office REITs is advantageous at a time when some office buildings in select cities are struggling with subpar occupancy rates, thus weighing on shares of the REITs that own those properties.
Additionally, WTRE is levered to some favorable demographic trends by way of its exposure to healthcare REITs and investors don’t have to pay up on valuation to take advantage of those trends.
Take the case of Ventas (VTR), WTRE’s largest holding.
“We remain optimistic about the sector’s longer-term prospects, given that the industry has steadily recovered over the past two years, supply will likely remain below the historical average in the coming years, and the demographic boon will create a massive spike in demand for senior housing,” noted Morningstar analyst Kevin Brown. “We also like Ventas’ acquisition of New Senior Investment Group to expand its exposure to the sector ahead of what we believe will be a decade of strong growth.”
Another WTRE holding that Morningstar is bullish on is Healthpeak Properties (PEAK), which accounts for 3.17% of the ETF’s roster.
“Healthpeak has high-quality assets in top markets that attract credit-grade tenants in both segments, so we believe it makes sense to strategically focus the company on the segments where it has an advantage,” added Brown.
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