Despite a weak economy, industrial REITs have seen increased returns. E-commerce is the key driver of their success. It continues to grow at an accelerating rate. Another factor is the low initial cost and ease of reselling. Let's look at the many reasons warehouse REITs have been successful. These are just a few:
E-commerce is an additional driver for industrial REIT outperformance
E-commerce is a boom for industrial REITs. According to the U.S. Commerce Department e-commerce sales increased 44% in the June-end period. And, eMarketer predicts that e-retail sales will account for 14.5% of U.S. retail sales in 2014. This is good news especially for industrial REITs which are benefiting from the increased demand from ecommerce companies for industrial spaces.
While most sectors are experiencing a tough environment, the industrial sector is largely unscathed by the COVID-19 regulations. An increase in ecommerce activity has led to an increase in the demand for distribution centers and warehouses. Last-mile industrial properties in high-income areas are experiencing strong pricing, occupancy, and rental growth. E-commerce plays a second role in the performance of industrial REITs.
Modern and strategically placed centres
If you are looking to make high-quality returns with minimal risk, industrial REITs could be an excellent investment option. Warehouses at the 'last mile of their distribution networks will benefit from retailers' increasing proximity to their end consumers. These warehouses have a tendency to generate more cash flow and create greater value than their counterparts. These warehouses offer a few things you should look out for. They are more modern, more efficient, and a good investment.
First, REITs have to be aware of the modern tenant's needs. They need secure grounds, mezzanine area, rooftop solar panel placement, and secure grounds. Employee amenities and flex space are also important considerations. A flexible facility is also important for logistics customers. Automation is changing the way industrial space is designed. Kiva Systems, a robot that sorts inventory and moves pallets, was acquired by Amazon in 2012. For a company that relies on such robots, the ideal location is near existing labor pools.
Low initial investment
Investors looking to diversify their portfolios or generate income can choose a warehouse REIT as an investment option. These investment vehicles have been around since decades and provide growth, income and diversification. Inflation hedges are good options for REITs. REITs are also simple to trade and buy. You have other options if your goal is to avoid high fees from financial advisors.
Warehouse REITs allow investors to access rapidly growing areas of the economy. Healthcare facilities are one example of the fastest-growing sectors in the United States. Other options include retirement communities and outpatient care centers. Warehouse REITs can yield excellent returns. They are not only high in growth but also more manageable, less complicated, and more liquid than real estate investments.
Easy re-leasing
A REIT investment can be a good way to increase your investment returns. These types of investments can be very profitable as they are always in high demand. The key is to select a region with high housing costs, steady rents, and low vacancy rates. San Francisco Bay Area is one area that could be profitable for a REIT. In San Francisco warehouse rents rose by 7% in quarter one.
FAQ
How does Inflation affect the Stock Market?
The stock market is affected by inflation because investors need to pay for goods and services with dollars that are worth less each year. As prices rise, stocks fall. You should buy shares whenever they are cheap.
What are the pros of investing through a Mutual Fund?
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Low cost - purchasing shares directly from the company is expensive. It's cheaper to purchase shares through a mutual trust.
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Diversification - most mutual funds contain a variety of different securities. If one type of security drops in value, others will rise.
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Professional management - Professional managers ensure that the fund only invests in securities that are relevant to its objectives.
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Liquidity- Mutual funds give you instant access to cash. You can withdraw the money whenever and wherever you want.
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Tax efficiency - mutual funds are tax efficient. This means that you don't have capital gains or losses to worry about until you sell shares.
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No transaction costs - no commissions are charged for buying and selling shares.
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Mutual funds are simple to use. All you need is a bank account and some money.
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Flexibility - you can change your holdings as often as possible without incurring additional fees.
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Access to information – You can access the fund's activities and monitor its performance.
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Investment advice - ask questions and get the answers you need from the fund manager.
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Security - You know exactly what type of security you have.
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Control - you can control the way the fund makes its investment decisions.
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Portfolio tracking - You can track the performance over time of your portfolio.
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You can withdraw your money easily from the fund.
Investing through mutual funds has its disadvantages
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Limited selection - A mutual fund may not offer every investment opportunity.
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High expense ratio - Brokerage charges, administrative fees and operating expenses are some of the costs associated with owning shares in a mutual fund. These expenses can impact your return.
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Lack of liquidity: Many mutual funds won't take deposits. These mutual funds must be purchased using cash. This limits your investment options.
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Poor customer service. There is no one point that customers can contact to report problems with mutual funds. Instead, you need to contact the fund's brokers, salespeople, and administrators.
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Rigorous - Insolvency of the fund could mean you lose everything
What is a REIT and what are its benefits?
A real-estate investment trust (REIT), a company that owns income-producing assets such as shopping centers, office buildings and hotels, industrial parks, and other buildings is called a REIT. These are publicly traded companies that pay dividends instead of corporate taxes to shareholders.
They are very similar to corporations, except they own property and not produce goods.
Statistics
- Our focus on Main Street investors reflects the fact that American households own $38 trillion worth of equities, more than 59 percent of the U.S. equity market either directly or indirectly through mutual funds, retirement accounts, and other investments. (sec.gov)
- The S&P 500 has grown about 10.5% per year since its establishment in the 1920s. (investopedia.com)
- "If all of your money's in one stock, you could potentially lose 50% of it overnight," Moore says. (nerdwallet.com)
- For instance, an individual or entity that owns 100,000 shares of a company with one million outstanding shares would have a 10% ownership stake. (investopedia.com)
External Links
How To
How to Trade in Stock Market
Stock trading is the process of buying or selling stocks, bonds and commodities, as well derivatives. Trading is French for traiteur. This means that one buys and sellers. Traders trade securities to make money. They do this by buying and selling them. It is one of oldest forms of financial investing.
There are many different ways to invest on the stock market. There are three types that you can invest in the stock market: active, passive, or hybrid. Passive investors only watch their investments grow. Actively traded investors seek out winning companies and make money from them. Hybrids combine the best of both approaches.
Index funds that track broad indexes such as the Dow Jones Industrial Average or S&P 500 are passive investments. This strategy is extremely popular since it allows you to reap all the benefits of diversification while not having to take on the risk. You can simply relax and let the investments work for yourself.
Active investing is about picking specific companies to analyze their performance. Active investors will analyze things like earnings growth rates, return on equity and debt ratios. They also consider cash flow, book, dividend payouts, management teams, share price history, as well as the potential for future growth. They then decide whether or not to take the chance and purchase shares in the company. If they feel the company is undervalued they will purchase shares in the hope that the price rises. They will wait for the price of the stock to fall if they believe the company has too much value.
Hybrid investing combines some aspects of both passive and active investing. A fund may track many stocks. However, you may also choose to invest in several companies. In this case, you would put part of your portfolio into a passively managed fund and another part into a collection of actively managed funds.