The Real Estate Investment Trust (REIT) space is one fraught with good companies and those which are likely to underperform for some time, given today’s economic environment. With significant risk ahead for REITs relating to rising interest rates in Canada and the U.S., investors are now considering how big of a role REITs should play in a given portfolio, given the higher risk profile of these investments relative to just a few months ago.
While rising interest rates do affect all REITs broadly, as REITs are generally considered to be a bond proxy along with utilities and other interest rate sensitive sectors, some REITs remain better long-term plays than others. In this regard, I’d like to point to one REIT which may have the ability to outperform in the long-run: Dream Industrial Real Estate Investment Trust (TSX:DIR.UN).
Industrial real estate is a sector which is unique to the more traditional real estate segments focused on by REITs: apartments/residential, office/commercial, retail. Industrial real estate differs primarily in the clients served and tenant base, typically focused on large buildings suitable for light manufacturing or warehousing and distribution related businesses.
With the rise of technology in the distribution business (think Amazon et. al.), industrial real estate near city centers has become more and more scarce, driving up property values and rents simultaneously. With the industry trending higher given changing fundamentals, increased consolidation, and further technological investment by distributors and industrial tenants, Dream Industrial REIT is one I would suggest investors take a look at. A yield of more than 8% doesn’t hurt as well.
Invest wisely, my friends.
