1 Top Real Estate Sector I’d Invest In and 1 I’d Actively Avoid

Investing in real estate is something I’ve been doing more of over the past few years. But that doesn’t mean I’ve gone out and purchased properties.

I actually don’t have the time or patience to manage a rental property, and since mid-2020, housing inventory has actually been extremely low. That’s lead to an uptick in home prices. And since I’m not one to overpay for anything needlessly, I’ve made a point to focus my real estate investing strategy on a product that doesn’t come with an MLS listing — REITs.

REITs, or real estate investment trusts, are companies that derive revenue from the properties they own and lease out. Within the realm of REITs, there are different sectors investors can look at dabbling in. And while there’s one sector I think is a great buy right now, there’s also one specific REIT sector I’m making a point to stay away from.

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A solid option to consider for your portfolio

The pandemic has changed consumer behaviors in a notable way. When the outbreak first erupted and vaccines were nonexistent or in short supply, many consumers took to ordering goods online to avoid the risks of shopping in stores.

Now, two years later, e-commerce isn’t slowing down. Although the widespread availability of vaccines may be making it safer to shop in person, a lot of people are, at this point, used to the convenience of placing orders online and having them delivered to their doors. And that trend is likely to hold steady.

That’s why now’s a great time to invest in industrial REITs — companies that own warehouses, fulfillment centers, and other such properties that are instrumental in distributing goods to consumers. In fact, many retailers are changing their own strategies in light of the e-commerce boom and sinking more resources into distribution centers, spending less on store renovations or new store locations. And given that the demand for industrial space is likely to grow exponentially in the coming years, this specific REIT sector could be a huge moneymaker.

A sector to stay away from

While the pandemic caused a shift in the way people shop, it also changed the way they work. These days, many employees are continuing to do their jobs remotely amid growing availability of full remote jobs. That makes office REITs a more precarious investment right now.

This isn’t to say that the office building is about to become obsolete. There are many major players in the corporate space who believe remote work is not, in fact, the wave of the future.

But let’s consider what the corporate landscape looks like now versus two years ago. Before the pandemic, remote work was largely something that was only approved as a one-off. These days, it’s practically the norm to some degree.

Sure, many big companies have workers reporting to the office. But are employees mostly back to five days of in-person work each week? No. And that alone puts office REITs in a tough spot.

Of course, in-person work might pick up as society learns to coexist with COVID-19. But I’m not convinced we’ll ever get back to a place where reporting to the office five days a week becomes the norm across the board. For that reason, I’m not looking to add office REITs to my portfolio anytime soon.

It’s a personal choice

Some people may feel that the industrial real estate market is oversaturated or will become so as more and more warehouses and fulfillment centers pop up. And some believe that office REITs are apt to recover and are therefore a good buy.

Ultimately, your best bet is to do your own research when deciding how to invest your money. But for me, industrial REITs are a buy right now, and office REITs are an investment I wouldn’t touch with a 10-foot pole.

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