Opinion: This one niche of the sagging real estate market is growing rapidly

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

The response to the novel coronavirus is adding a twist to the real estate adage that it’s all about location, location, location.

Even before the coronavirus crisis, investors were well aware that most brick-and-mortar retailers — and their landlords — were facing a dire threat from the rapid growth of online shopping.

But now that working at home has become a new norm for a sizable number of people, more is on the table. “Location” now has a different meaning because it’s no longer about a physical structure in an attractive area.

That’s because two areas of growth for real estate investment trusts, or REITs, are data centers that are benefiting from cloud-based collaboration and the work-from-home trend, and the rollout of 5G networks.

Threats to real estate

As office leases expire, corporate management teams will have an incentive and opportunity to save a bundle. Not only can they trim their physical office footprints, they may be able to do so at a significantly reduced cost per square foot, with lower overall demand.

So now instead of having one real-estate sector to automatically avoid (unless you are a professional with intimate knowledge of value plays within the space), you have two: retail and offices.

“You will see every CEO ask, ‘Do we really need all this office space?’ ” said John Traynor, chief investment officer of People’s United Advisors in Fairfield, Conn., in an interview.

Pacer Benchmark Data & Infrastructure Real Estate Sector EFT

The Pacer Benchmark Data & Infrastructure Real Estate Sector EFT SRVR, +2.43% takes a weighted approach to investing in data center REITs and other companies that store and transmit data, including owners of cell towers.

SRVR is up 3.5% this year through April 24 (including dividends), compared with declines of 11.7% for the S&P 500 SPX, 1.65% and 13.9% for the S&P 500 real-estate sector.

Here are all of its holdings as of the close on April 24:

Equinix Inc. EQIX, +2.77% 17.3% 1.55% 18% U.S.
Crown Castle International Corp CCI, +1.18% 16.3% 2.97% 15% U.S.
American Tower Corp. AMT, +2.41% 15.6% 1.62% 7% U.S.
CyrusOne Inc. CONE, +2.68% 5.2% 2.75% 12% U.S.
Cogent Communications Holdings Inc CCOI, +1.69% 5.2% 2.88% 34% U.S.
CoreSite Realty Corp. COR, +1.87% 5.0% 4.04% 9% U.S.
SBA Communications Corp. Class A SBAC, +0.56% 5.0% 0.61% 27% U.S.
QTS Realty Trust Inc. Class A QTS, +3.45% 4.9% 2.95% 19% U.S.
Digital Realty Trust Inc. DLR, +3.27% 4.9% 2.99% 26% U.S.
GDS Holdings Ltd. ADR Class A GDS, -1.02% 4.4% 0.00% 15% China
Iron Mountain Inc. IRM, +5.02% 3.4% 10.51% -25% U.S.
Lamar Advertising Co. Class A LAMR, +9.99% 2.6% 8.08% -44% U.S.
Switch Inc. Class A SWCH, +4.13% 2.5% 0.66% 21% U.S.
Uniti Group Inc UNIT, +1.99% 2.1% 9.47% -21% U.S.
Ooutfront Media Inc. OUT, +5.38% 2.1% 12.03% -52% U.S.
21Vianet Group Inc. ADR Class A VNET, -0.47% 1.9% 0.00% 130% China
Clear Channel Outdoor Holdings Inc. CCO, +13.46% 0.8% 0.00% -73% U.S.
Landmark Infrastructure Partners LP LMRK, +11.02% 0.5% 8.16% -39% U.S.
Source: FactSet

You can click on the tickers for more about each company.

You will need to scroll the table to see all the data.

The ETF has a trailing 12-month distribution yield of 1.63%, according to FactSet. You can see on the table that some of the companies held by the fund have much higher yields, including some that are alarmingly high — indicating investors aren’t confident the yields will be sustained. These are also relatively small holdings in the portfolio.

The top three holdings make up nearly half the ETF. Equinix EQIX, +2.77% is a REIT focused on owning and operating data centers. Crown Castle CCI, +1.18% and American Tower AMT, +2.41% are REITs that own cell towers and lease space on them to multiple tenants running various communications networks.

One of the holdings with a very high yield is Iron Mountain IRM, +5.02%, which focuses on corporate information storage and disaster recovery. The stock is down 25% this year. Mitch Rubin, portfolio manager of the RiverPark Long/Short Opportunity Fund RLSIX, +1.24% RLSFX, +1.25% recently said he had shorted the stock because it continues mainly to store paper. “That business will be much smaller two years from now,” he said.

Originally Published on MarketWatch

Home of Science
Follow me

- Advertisement -




Why the stock market is up even with historic job losses

A record number of Americans just lost their job, and yet stocks are moving higher. This seems paradoxical given the economic toll — to...

Why Use Netflix?

Why Use Netflix?If you've been searching for a great way to connect with your friends and family and want to be able to...

Is it Possible to Market Online?

In today's time, it is possible to do an excellent online marketing campaign. But what is the secret? What is the secret to online...

Meet Kelsea Moscatel, Cosmopolitan Turkey’s March Cover Star

Snob World co-founder and travel influencer Kelsea Moscatel is giving Cosmopolitan Turkey readers a glimpse into her glamorous lifestyle, appearing on the cover of...

Bernanke rejects Great Depression comparisons as he says GDP could slump by 30%

Ben Bernanke, the former chairman of the Federal Reserve, is a scholar of the Great Depression, a background he put to use during the...
Home of Science
Follow me