REITs in 2021: Fully recovered?

A comeback for REITs will take time and be uneven, but there are signs of improvement across certain property types.

Real estate investment trusts (REITs) have been hit hard during the pandemic. But as the U.S. economy recovers (albeit haltingly and unevenly) and more people get vaccinated, we feel that we can look forward to new opportunities from underappreciated sectors.

Our white paper on commercial real estate in a post-pandemic economy explores these opportunities and recovery for REITs.

Recent innovations in technology—spurred by the demand for connectivity as people work, shop, study, and communicate from home—have driven positive momentum in property sectors such as industrials, infrastructure, and data centers. This represents a larger shift in the REIT sector mix than over the past decade, one in which REITs that support the digital economy have seen a surge in demand and importance.

Cyclical REIT sectors, like travel, retail, and lodging, suffered greatly during the pandemic, too. However, those beaten-down industries are now soaring, recouping much of their losses as the economy recovers and consumers are returning to a sense of normalcy. Conversely, REITs that support industries still affected by the pandemic, such as offices, are recovering slowly.

As the economy recovers, so will REITs, albeit unevenly. Sabrina Bowens-Richard, CFA, CAIA®, and senior investment strategy analyst for Portfolio & Market Strategy, Truist Advisory Services, Inc., favors a diversified approach with meaningful exposure to growth-oriented technology sectors and those improving cyclical sectors. Read the white paper for more details.

REITs are subject to risks, including market, natural disasters, and interest rate increases. The dividend income received from REITs isn’t tax advantaged like corporate dividend income.