Alex Pettee, CFA
Industrial REITs: Not Immune From Contagion
Industrial REITs have delivered relentless outperformance over the past half-decade, powered by the "need for speed" in consumer goods delivery, surging another 48% in 2019.
Riding the e-commerce wave, demand for well-located logistics assets has far outpaced supply during the past decade. Rents have roughly doubled since 2015, rising another 8% in 2019.
Industrial REITs didn't skip a beat from the trade war, but CV-19 poses a different kind of threat. These REITs have become increasingly more levered to U.S. consumer spending.
As one of the more economically-sensitive sectors, industrial REITs will see a relatively more muted benefit from lower interest rates compared with other more defensive real estate sectors.
The sector's stellar fundamentals will be put to the test in early 2020. The long-term secular tailwinds, driven by domestic e-commerce demand, should resume following a potential near-term slowdown in leasing activity.