• Alex Pettee, CFA

Industrial REITs: Empty Shelves, Ample Opportunity

  • Out of Stock: The red-hot industrial property market - "ground zero" of supply-chain shortages - continues to ride a historic demand-supply imbalance as businesses scramble to build out supply resiliency.

  • Industrial REITs - which recorded the strongest dividend and FFO growth of any real estate sector in 2020 - continue to thrive amid "extreme competition" for logistics and distribution space.

  • Despite robust levels of new development - particularly from REITs themselves - vacancy rates remain at historic lows while robust demand has powered 45 straight quarters of positive net absorption.

  • Pandemic-driven supply chain disruptions came as inventory levels were already historically lean amid a shift towards "just-in-time" inventory management. Resilient supply chains will require substantial investments in logistics space.

  • Logistics REITs surely aren't cheap, but absent significant efficiency gains in warehouse utilization, the secular tailwinds of limited supply and robust demand should persist into the back-half of this decade.

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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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