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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