Amid dramatic shifts in the retail landscape, there’s an increasing need for warehouses for use by e-commerce companies. The Pacer Benchmark Industrial Real Estate SCTR ETF (NYSEArca: INDS) is an exchange traded fund dedicated to that theme.
INDS offers investors exposure to US companies that generate the majority of their revenue from industrial REITs that are part of the e-commerce distribution and logistics network. INDS provides exposure to the growing e-commerce space by investing in data center and distribution center REITs, along with higher quality retail real estate.
“Better to favor what is already working in real estate investment trusts, or REITs, says Brent Dilts, an analyst with UBS. That means warehouse owners. Their dividend yields won’t impress, but they are riding an e-commerce boom that is likely to drive future rents higher,” reports Jack Hough for Barron’s.
INDS Emerging from the Pandemic Stronger
E-commerce or online retail has been a growing trend that quickly accelerated in 2020 due to the coronavirus pandemic. Investors can look to exchange traded fund strategies to capture this shift in consumer habits.
The COVID-19 pandemic is forcing a slew of malls and retail store closures across the world. In the U.S., many non-essential retailers are temporarily closed, and while traditional grocery stores remain open, many shoppers are opting to order from home and not risk contracting the coronavirus by venturing outside.
Brick-and-mortar retailers are struggling while their online rivals are thriving. Those online retailers need warehouse space.
The new structural demand growth trend among shoppers around the world can potentially provide rewarding opportunities for investors. Investors should target these companies found all along the chain of activities that are necessary to online shopping. For example, investors can look to retailers seeking to sell goods online or e-commerce platform firms that can provide them with the ability to build a store.
“E-commerce requires roughly three times as much warehouse space as store-based retail. Sellers and manufacturers are also eager to build inventories, following supply disruptions from the pandemic and a trade war with China. That means warehouse demand is likely to outstrip new supply in the years ahead, pushing rents well higher. Already, Dilts estimates, market rents are 14% to 18% higher than ones embedded in contracts for Prologis and Duke,” adds Barron’s.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.