COVID-19 has depressed many markets and created many buying opportunities in the process. Is land one of those opportunities? Today, Wealth Daily contributor Samuel Taube takes a look at real estate investments in the time of COVID-19...
COVID-19 has depressed many markets and created many buying opportunities in the process. Is land one of those opportunities? Today, Wealth Daily contributor Samuel Taube takes a look at real estate investments in the time of COVID-19...
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Kanye Says Buy Land. Should You?
By Samuel Taube
Written Sep 27, 2020
Kanye West isn’t exactly a trusted source of financial advice, but he has done very well for himself and is a very effective communicator. He recently tweeted this:
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Mr. West brings up an interesting point. Like almost every other asset class, real estate investments have been hit hard by the COVID-19 pandemic. In fact, in a June survey of more than 340 real estate investors conducted by MyHouseDeals, more than 40% had a negative outlook on the market in the next year.
But as legendary value investor John Templeton once said, “The time of maximum pessimism is the best time to buy.” The aforementioned rapper might be onto something in recommending real estate investments during such a dark period for the industry.
Where can real estate investors find value during a strange time like this? Let’s take a look at some real estate investment trusts (REITs) that could actually benefit from the current situation...
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Storage REITs
The self-storage industry had been on a tear before the COVID-19 pandemic; construction spending in the sector increased by more than 500% in the last five years according to the U.S. Census Bureau.
Plus, the industry appears to be shrugging off the virus — perhaps even profiting from it. Self-storage has been classified as an essential business by even the most strictly quarantined jurisdictions, and there’s lots of demand for it.
According to a recent survey of 2,000 young adults by TD Ameritrade, a whopping 39% of adults aged 24 to 29 are either already living with their parents because of COVID-19 or plan to move back home because of it, and all of their stuff has to go somewhere.
These factors explain why storage rents have actually increased in select markets like Pittsburgh, Charleston, and Columbus over the summer months, while most kinds of rents are in freefall.
Storage REITs like Public Storage (NYSE: PSA) and Extra Space Storage (NYSE: EXR) provide exposure to this red-hot industry.
Data Center REITs
As we all know, one consequence of COVID-19 is that work has moved online for many people. I, for example, am writing this article from my apartment and not from Angel Publishing’s offices.
That’s bad news for the office segment of the real estate sector but good news for the data center segment. After all, the huge surge in remote work has led to a significant strain on the servers that host popular websites and web services.
According to network intelligence firm ThousandEyes, the weekly number of network outages around the world broke records in February and March — a sign that many sites and services are reaching their physical capacity and will need to buy or build more server space to keep up with demand.
Fortunately, there’s a special kind of REIT that invests specifically in server warehouses. Digital Realty Trust (NYSE: DLR) and CyrusOne (NYSE: CONE) both give investors exposure to the extremely in-demand properties that house the equipment powering the burgeoning work-from-home internet.
Warehouse REITs
E-commerce is another major winner of the economic disruption caused by COVID-19. According to e-commerce services firm Signifyd, online sales surged by 40% in the last five days of May when compared to the last five days of February.
And in its most recent quarter, Amazon’s revenue surged 40% year over year — the strongest quarter of revenue growth since 2018. Some analysts think it could hit $100 billion in sales next quarter.
Once again, this is bad news for certain parts of the real estate market — like retail space — but good news for others, like warehouse space.
Luckily, you can buy REITs that specifically invest in the warehouses used for e-commerce fulfillment. Stag Industrial (NYSE: STAG) and Prologis (NYSE: PLD) both count Amazon among their largest tenants.
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As you can see, there’s still value to be had in real estate investments during these strange times — if you know where to look.
All of the REITs we’ve profiled here are up by significant margins this year, and as we’ve discussed, they show no signs of slowing down anytime soon.
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But there’s no denying that the COVID-19 pandemic has been rough on investors who depend on capital preservation investments that generate steady income.
Finding value in real estate is one way to deal with the difficulties of income investing today — but subscribing to [Real Income Trader](is easier.
Editor Briton Ryle currently sports an average gain of more than 100% per trade because he focuses on reliable dividend stocks, nine of which have paid out in the last month. [Click here to learn more](.
Until next time,
[Monica Savaglia]
Samuel Taube
Samuel Taube brings years of experience researching ETFs, cryptocurrencies, muni bonds, value stocks, and more to [Wealth Daily](. He has been writing for investment newsletters since 2013 and has penned articles accurately predicting financial market reactions to Brexit, the election of Donald Trump, and more. Samuel holds a degree in economics from the University of Maryland, and his investment approach focuses on finding undervalued assets at every point in the business cycle and then reaping big returns when they recover. To learn more about Samuel, [click here](.
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