Real estate investment trusts (REITs) and the related exchange traded funds (ETFs) are normally viewed as defensive investments, not growth ideas. One ETF is changing that notion and investors are benefiting the fund’s growth feel.
This year, industrial REITs are acting like growth stocks, explaining why the Pacer Benchmark Industrial Real Estate SCTR ETF (NYSEArca: INDS) is up 21.26% year-to-date, making it one of the best-performing real estate ETFs on the market.
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.
“Many investors own real estate investment trusts (REITs) for dividend income. But industrial REITs are acting more like growth stocks, up an average 21% this year—compared with a 17% gain for the FTSE NAREIT Equity REITs index—and they could produce more strong returns,” reports Daren Fonda for Barron’s.
Big Growth Ahead
As the e-commerce industry continues to expand in the digital age, industrial and warehouse space in the real estate industry have enjoyed strong support. Investors can also target this potential growth opportunity in the REITs sector linked to online retailers through a targeted exchange traded fund strategy.
“Indeed, e-commerce has been a huge driver for the industrial REIT sector and it shows no signs of slowing,” reports Barron’s. “With e-commerce sales growing more than 14% a year, the REIT sector should have a natural demand driver. Indeed, he expects the sector’s vacancy rate to continue falling through 2019, going from 7.1% to 6.8% by year-end.”
INDS is a play on e-commerce and the related real estate demands. Currently, e-commerce and online shopping represent about 10% of overall U.S. retail sales, a number that is expected to continue growing in the years ahead. The sudden rise of online giant retailers like Amazon has increased demand for warehouses to store inventory. Around 25% to 30% of warehouse space is currently dedicated to e-commerce.
INDS is outperforming the largest REIT ETF by 410 basis points this year.
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