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  • Alex Pettee, CFA

Cell Tower REITs: Space Race Risk

  • Cell Tower REITs - the single-largest property sector - have been a critical growth engine over the past half-decade and now account for nearly a fifth of total REIT market value.

  • Becoming dominant players of both the telecommunications and REIT sectors through relentless growth, cell tower REITs reported another stellar "beat-and-raise" quarter with double-digit earnings growth.

  • While the near-term technological risk is limited, the well-funded "space race" to build massive Low-Earth-Orbit communications networks could eventually alter the competitive positioning within the telecom sector.

  • With great power comes great responsibility. Twice the weight of the next largest property sector, the market-cap-weighted ETFs are increasingly levered to the performance - and low dividend yields - of 3 massive Cell Tower REITs.

  • Don't bet against Elon? The medium-term outlook for cell tower REITs remains promising, but with these REITs "priced for perfection," some caution is warranted, given their potential longer-term technological risk.

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Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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