Real Estate Investment Trusts come in all flavors. Knowing the REIT sectors that you are investing in will have an impact on your portfolio based on different business cycles. In layman’s terms, real estate sectors perform differently based on what is happening in the economy.
This is part 2 of our Introduction to REIT series. You can find part 1 below.
Introduction to REITs
For this article, we will review the major REIT sectors. This will help you build background knowledge as we move into part 3, which is how to invest in REITs. Let’s get started.
Office REITs. Office REITs focus on commercial real estate involving offices and rental business spaces. How do you think this sector did during the pandemic and work-from-home? Some Office REITs are Empire State Realty Trust (ESRT) and Brandywine Realty Trust (BDN).
Retail REITs. Retail REITS focus on malls and shopping centers. Also, they can own big-box shopping centers. Again, how do you think they performed during the pandemic of 2020? Some Retail REITs are Realty Income Corporation (O) and Tanger Factory Outlets (SKT). O is one of the few REITs included in the S&P 500.
Residential REITs. Residential REITs focus on residential housing such as apartment buildings, student housing, single-family homes, and mobile home lots. With housing prices rising and an overall lack of real estate, how do you think this sector is performing? Some Residential REITS are Independence Realty Trust (IRT) and Essex Property Trust (ESS).
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Healthcare REITs. Healthcare REITs focus on the healthcare sector. Buildings including are hospitals, senior living facilities, and medical offices. Was the pandemic a boom or bust for the hospital sector? Some healthcare REITs are Medical Property Trust (MPW) and LTC Properties (LTC).
Infrastructure REITs. Infrastructure REITs buy properties that build the inner workings of our cities and towns. These include cell towers, fiber, telecommunication structures, and energy pipelines. With 5G being built out across the nation, how do you think cell tower REITs are performing? Some Infrastructure REITs are American Tower Corporation (AMT) and Crown Castle Internation (CCI).
Mortgage REITs. Mortgage REITs (or mREITs) provide funding for rental properties and also purchase mortgage-backed securities (MBS). Mortgage-backed securities are bundles of mortgages packaged together to form a bond-like asset. With interest rates near zero, how do you think this sector is performing? Some mREITs are AGNC Investment Corp (AGNC) and Colony Credit Real Estate (CLNC).
Industrial REITs. Industrial REITs focus on large facilities such as warehouses and distribution centers. With the move to online shopping, where do retailers such as Amazon keep their products? Some Industrial REITs are Americold Realty Trust (COLD) and Duke Realty Trust (DRE).
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Hospitality REITs. Hospitality REITs focus on lodging and resorts. They own different classes of hotels and resorts across the nation. With the sharp decrease in travel and vacations, how do you think this sector performed? Some Hospitality REITs are Apple Hospitality REIT (APLE) and Ashford Hospitality Trust (AINC).
Timberland and Farmland REITs. Timberland and Farmland REITs focus on land. They also harvest timber, farm crops, and sell these products to producers. Do you think these REITs’ focus on land can sustain in any economy? Some Timberland and Farmland REITs are Rayonier Inc (RYN) and Farmland Partners (FPI).
Self Storage REITs. Storage REITs focus on self-storage facilities. They also collect rents from individuals and businesses from these facilities. With an uptick in downsizing homes and then moving into apartments, how do you believe this sector is performing? Some self-storage REITs are Public Storage (PSA) and Life Storage (LSI).
Data Center REITs. Data Center REITs focus on data storage, not necessarily physical storage. Think cloud storage via large data server facilities. With the ongoing move to cloud storage, how do you think this sector will perform over the next 5-10 years? Some data center REITs are Digital Realty (DLR) and Equinix, Inc. (EQIX).
As you can see, there are many REIT sectors. These are just the general categories. REITs can specialize even further. For instance, Independence Relat Trust (IRT) focuses on apartment complexes. Start conducting your research. I would recommend REIT.com and HoyaCapital as good places to start.
In part 3 we will answer some of the questions that I scattered throughout this article. The focus will be How to Invest in REITs. See you in the next one.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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