Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • 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.

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