Since 1991, U.S. REITs have outperformed the S&P 500 by more than 7% annually in late-cycle periods and have provided considerable downside protection in recessions, highlighting the potential value of conservative, lease-based revenues and high dividend yields in an uncertain environment (see chart below).
Is it a good time to invest in REITs in 2021?
Long-term, REITs have proven to be solid performers. The FTSE Nareit All Equity REITs index, for example, has average annual gains of 10.29% over ten years as of 2021, compared to 14.90% for the Russell 1000 index of large-cap stocks and 3.39 percent for the Bloomberg Barclays U.S. Aggregate Bond index. Individual REITs have performed substantially better. For example, Crown Castle International, a provider of mobile phone towers.
How do REITs fare during a downturn?
REITs can help protect your portfolio from economic downturns, but investors should be cautious. REITs are an excellent gauge for how REITs are performing since they produce consistent income through dividend payouts, which boost investment returns.
What investments perform well during a downturn?
During a recession, a solid investing approach is to look for companies that are retaining strong balance sheets or stable business models despite the economic downturn. Utilities, basic consumer products conglomerates, and defense stocks are examples of these types of businesses. Investors frequently increase exposure to these groups in their portfolios in anticipation of declining economic conditions.
Which REITs will weather the storm?
Parts of the real estate industry may provide some protection against economic downturns. Even though the economy is still growing, the recovery from the pandemic is slowing, with investors worried about inflation risks and the chronic delta version of the coronavirus eroding and possibly reversing that progress. If cautious investors take defensive positions before economic cycles alter, they can be ahead of the game. Income-generating real estate investment trusts, which buy property, collect rent, and distribute at least 90% of their taxable income to shareholders, can be a good defensive investment. REITs are an excellent gauge for how REITs are performing since they produce consistent income through dividend payouts, which boost investment returns. Because their prices are unlikely to see substantial variations during an economic crisis, it’s preferable to concentrate on REITs in solid areas like storage, distribution, and data centers, as well as health care facilities. During more difficult economic circumstances, these seven REITs have the potential to offer favorable results.
COLD is a publicly traded real estate investment trust that specializes on connecting food farmers with supermarkets, restaurants, and other food service providers. It’s also noted for being a market leader in temperature-controlled warehouse management, acquisition, and development. The business model of Americold is what sets it apart. The company provides supply chain solutions as well as digital solutions to provide inventory insight to food producers, retailers, and service providers throughout the world. COLD also provides transportation consolidation to ensure that inventory is delivered quickly. The REIT exhibited a strong recovery from the depths of pandemic shutdowns, with revenue up 33% year over year in the first half of 2021. COLD is also a REIT to consider during a downturn because it has the most experience in supply chain services in its industry.
CONE is a data center REIT with a strong rate of expansion. Health care, technology, retail, energy, entertainment, and finance are among the industries in which it operates. CONE has a global footprint, with data centers throughout North and South America, as well as Europe. CONE announced expansions in Madrid and Frankfurt, Germany, two of Europe’s strongest data center markets, in its most recent earnings release. CONE’s financial performance in 2021 was impressive. The company saw a 21 percent growth in revenue year over year in the first quarter, followed by an 11 percent increase in the second quarter. With a gross asset value of more than $9 billion and long-term debt of $3.5 billion, the company has a healthy financial sheet. ESG, or environmental, social, and governance, themes such as energy efficiency and renewable alternatives are part of the company’s mission statement.
Life Storage has been in the self-storage market for a long time. Since its founding in 1985, LSI has grown to become one of the world’s largest storage companies. During the pandemic, the company experienced significant growth, which explains its geographically diverse portfolio and growth approach. Life Storage has over 1,000 facilities in 34 states and a diverse customer base that includes both residential and commercial clients. Asset recycling is used by LSI to assist generate new properties with stronger revenue growth. In addition, LSI just increased its dividend by 16 percent, which could appeal to income investors.
CCI is a leader in the business when it comes to expediting network connections, scaling networks, and constructing industrial networks. With a presence in most major U.S. cities, the firm manages and leases more than 40,000 cell towers. This infrastructure connects communities and businesses across the country to wireless services. With the rise in smartphone data usage and the need for new 5G networks, the company’s industry expertise in accelerating network connections and enhancing technological infrastructure is helping to fuel this expansion. CCI has a higher forward dividend yield than the market median of 2.3 percent.
Construction, development, property management, and leasing are among DRE’s supply chain specialties. Duke Realty is an e-commerce favored developer that stands out as a distribution leader, which offers it an advantage because industrial warehouses that store merchandise from e-commerce transactions will continue to be in demand. In addition, Amazon is one of DRE’s largest tenants. Duke will gain from the industry’s need for large-scale warehouses and distribution centers as e-commerce continues to grow. Duke Realty offers assets strategically positioned across the country that provide access to industrial development sites and mixed-use developments.
WELL is known for investing in properties that provide services including elder housing, outpatient medical facilities, and rehabilitation centers, all of which are aimed at keeping patients out of hospitals and lowering health-care expenses. Sunrise Senior Living, Cogir Real Estate, and Brandywine Living are just a few of Welltower’s key partners. WELL is well positioned to profit from the predicted spike in senior health-care costs. Indeed, the health-care industry is thought to be recession-proof since it is always a priority, regardless of economic conditions.
Is Warren Buffett a REIT Owner?
STORE Capital (STOR -2.56 percent ) is not just a stock in Berkshire Hathaway’s (BRK. A 0.83 percent )(BRK. B 0.70 percent ) stock portfolio, but it is also the only real estate investment trust (REIT) in which Warren Buffett’s conglomerate has invested its own money.
Is 2022 a favourable year for real estate investment trusts?
This will be a period of economic expansion that will fuel recovery across a broad variety of real estate and REIT industries, assuming COVID-19 versions remain substantially in check. As Calvin Schnure of Nareit summarizes, the coming year is likely to see a significant improvement in overall economic conditions, with higher GDP, job growth, and incomes, in a supportive financial market environment where inflation pressures gradually subside and long-term interest rates remain well below historical norms.
The Paul Simon lyric “nothing is different, yet everything’s changed” resonates as we hopefully transition out of this period of human loss and economic and social turmoil. Schnure’s perspective takes into account what we may deduce about which of the enormous changes in how we interact with real estate and the built environment are permanent and which are transient. Most importantly, he discusses how rising digitization of shopping will affect retail, as well as how the future of office use will alter as companies return to the office and experiment with hybrid and work-from-home arrangements.
Which REITs are the safest?
These three REITs are unlikely to appeal to investors with a value inclination. When things are uncertain, though, it is generally wise to stick with the biggest and most powerful names. Within the REIT industry, Realty Income, AvalonBay, and Prologis all fall more generally into that category, as well as within their specific property specialties.
These REITs are likely to have the capital access they need to outperform at the company level in both good and bad times. This capacity should help them expand their leadership positions and back consistent profits over time. That’s the kind of investment that will allow you to sleep comfortably at night, which is probably a cost worth paying for conservative sorts.
Are REITs a decent investment during a downturn?
Following the outbreak of the pandemic, demand for data storage, particularly self-storage, skyrocketed. Data consumption increased as more individuals stayed at home and worked. Given the current level of volatility as omicron and other coronavirus variations emerge, data consumption demand would almost certainly rise in the event of a market crash. Alternative factors, such as e-commerce, autonomous vehicles, and other AI applications, are also pushing data storage need.
With a debt-to-EBITDA ratio of 5.6x, the company’s financial position isn’t as strong as Public Storage’s, but its growth prospects are bright. Digital Realty Trust recently announced the acquisition of Teraco, a South African data storage operator, which will help the firm expand its footprint in Africa by adding seven existing facilities and three development prospects to its portfolio.
Both of these REITs are in solid real estate sectors that will undoubtedly profit from an economic downturn or market catastrophe. They’re excellent buys for patient investors before or after a market crash, thanks to their high-quality portfolios.
What should I buy before the financial crisis?
Having a strong quantity of food storage is one of the best strategies to protect your household from economic volatility. In Venezuela, prices doubled every 19 days on average. It doesn’t take long for a loaf of bread to become unattainable at that pace of inflation. According to a BBC News report,
“Venezuelans are starving. Eight out of ten people polled in the country’s annual living conditions survey (Encovi 2017) stated they were eating less because they didn’t have enough food at home. Six out of ten people claimed they went to bed hungry because they couldn’t afford to eat.”
Shelf Stable Everyday Foods
When you are unable to purchase at the grocery store as you regularly do, having a supply of short-term shelf stable goods that you use every day will help reduce the impact. This is referred to as short-term food storage because, while these items are shelf-stable, they will not last as long as long-term staples. To successfully protect against hunger, you must have both.
Canned foods, boxed mixtures, prepared entrees, cold cereal, ketchup, and other similar things are suitable for short-term food preservation. Depending on the food, packaging, and storage circumstances, these foods will last anywhere from 1 to 7 years. Here’s where you can learn more about putting together a short-term supply of everyday meals.
Food takes up a lot of room, and finding a place to store it all while yet allowing for proper organization and rotation can be difficult. Check out some of our friends’ suggestions here.
Investing in food storage is a fantastic idea. Consider the case of hyperinflation in Venezuela, where goods prices have doubled every 19 days on average. That means that a case of six #10 cans of rolled oats purchased today for $24 would cost $12,582,912 in a year…amazing, huh? Above all, you’d have that case of rolled oats on hand to feed your family when food is scarce or costs are exorbitant.
Basic Non-Food Staples
Stock up on toilet paper, feminine hygiene products, shampoo, soaps, contact solution, and other items that you use on a daily basis. What kinds of non-food goods do you buy on a regular basis? This article on personal sanitation may provide you with some ideas for products to include on your shopping list.
Medication and First Aid Supplies
Do you have a chronic medical condition that requires you to take prescription medication? You might want to discuss your options with your doctor to see if you can come up with a plan to keep a little extra cash on hand. Most insurance policies will renew after 25 days. Use the 5-day buffer to your advantage and refill as soon as you’re eligible to build up a backup supply. Your doctor may also be ready to provide you with samples to aid in the development of your supply.
What over-the-counter drugs do you take on a regular basis? Make a back-up supply of over-the-counter pain pills, allergy drugs, cold and flu cures, or whatever other medications you think your family might need. It’s also a good idea to keep a supply of vitamin supplements on hand.
Prepare to treat minor injuries without the assistance of medical personnel. Maintain a well-stocked first-aid kit with all of the necessary equipment.
Make a point of prioritizing your health. Venezuelans are suffering significantly as a result of a lack of medical treatment. Exercise on a regular basis and eat a healthy diet. Get enough rest, fresh air, and sunlight. Keep up with your medical and dental appointments, as well as the other activities that promote health and resilience.