While most markets saw a significant comeback in the first quarter of 2019, one industry that has been surging consistently throughout the first half of the year has been the real-estate sector.
In particular, real estate stocks have been performing better than ever as low-interest rates coupled with positive expectations on the future of e-commerce spurred the sector to new highs this year.
On Monday around 8 of the 32 companies listed on the S&P 500’s real-estate sector were trading at their highest levels seen in over a year. With the sector ending Monday’s trading session up 0.9 percent, the real-estate portion of the S&P 500 is the second-best performer in the index so far this year, falling behind only the fast-soaring technology sector.
Investors tend to appreciate real estate stocks when interest rates are low, as real-estate investment trusts (REITs) pay steady dividends that attract low-risk investors looking for consistent income.
However, there’s still plenty of variation in the sector, which includes companies that own malls, senior housing, apartment buildings, and more. But one area of real estate that’s been taking off is warehouse space. Fueled by speculations that e-commerce will continue to grow, investors are jumping into companies that own warehouses as an indirect play on e-commerce growth.
Prologis (NYSE: PLD) and Duke Realty Corp (NYSE: DRE), rose by 1.2 percent and 1.25 percent respectively on Monday. These industrial REITs own and operate a number of warehouses and are trading at their highest levels seen in almost 12 years.
The Wall Street Journal goes on to report that investors are looking at these two warehouse-focused REITs as a way to bet on the future of retail and e-commerce. Prologis’ stock has increased by a drastic 37 percent so far in the year, while Duke Realty’s shares have surged by 23 percent in the same time period.
While most analysts expect e-commerce giants such as Amazon (NASDAQ: AMZN) and others will continue to grow in the next few years, real estate stocks haven’t always surged on the promise of online retailing.
Back in 2018, the S&P 500 real-estate sector fell by 5.6 percent as interest rates climbed. However, with most investors expecting that the Federal Reserve will potential cut rates as global growth falters, real estate stocks are expected to continue to surge as a result.
Already we’ve seen a number of institutional investors make major moves in the real estate market precisely for this reason. Recently, private-equity giant Blackstone Group made an $18.7-billion acquisition to purchase a network of warehouses in the U.S.
This marks the largest private real-estate transaction in the country’s history, and is a sign to savvy investors that the industrial real-estate space and their respective stocks have plenty of upside in the coming months.
Prologis Company Profile
Prologis was formed by the June 2011 merger of AMB Property and ProLogis Trust. The company develops, acquires, and operates approximately 687 million square feet of high-quality industrial and logistics facilities in 19 countries. The company is organized into four global divisions (Americas, Europe, Asia, and Other Americas) and operates as a real estate investment trust. – Warrior Trading News
