The Best Defense Is A Great Offense: Specialty REITs Can Help Thwart Effects Of Recession
MyEListings' markets and economics editor and creates content about global macro events and their impact on US commercial real estate.
Investors are looking for strategies to protect their portfolios and continue compounding as the global economy faces rising uncertainty and a possible downturn. Providing exposure to numerous real estate types and their individual business strategies, real estate investment trusts (REITs) have long been regarded as reliable and alluring investment instruments. This article focuses on specialty REITs, which include a variety of often-specific property types and can provide both diversity and durability during economic downturns. We will explore the advantages of investing in specialized REITs, as well as look at some specialty REIT statistics and discuss how gaming companies might offer useful cover during recessions.
What Are Specialty REITs?
Specialty REITs invest in unusual property types, including casinos, data centers, timberlands, and even billboards, movie theaters, and jails. This wide range of property types gives investors exposure to particular industries and business strategies, thereby increasing diversification and reducing risk.
Why Should I Buy Into Specialty Reits?
| Property Type | Number of REITs | Example REIT | Ticker Symbol | 1-Year Return | Dividend Amount |
|---|---|---|---|---|---|
| Data Centers | 5 | Equinix, Inc. | EQIX | 12.54% | $10.76 |
| Gaming | 4 | Gaming & Leisure Properties | GLPI | 6.32% | $2.72 |
| Timber | 3 | Weyerhaeuser Company | WY | 16.23% | $1.60 |
| Infrastructure | 2 | American Tower Corporation | AMT | 8.89% | $5.52 |
| Prisons | 2 | CoreCivic, Inc. | CXW | -0.21% | $1.76 |
| Billboards | 2 | Lamar Advertising Company | LAMR | 7.15% | $4.50 |
| Movie Theaters | 1 | EPR Properties | EPR | 15.38% | $4.32 |
Diversification
Investors can access a variety of property types, each with its own specific set of drivers and economic factors, by investing in speciality REITs. Due to the possibility that the performance of various property kinds may not be highly associated, this diversification can lower portfolio risk.
Specialty Market Exposure
Allocating funds to a Niche REIT can give investors access to specialized sectors of the marketplace that can be less susceptible to changes in the overall economy. For instance, data center REITs might profit from the continuous rise in demand for cloud computing and data storage, while gaming REITs might provide some level of recession resistance, even as the general economy seeks lower levels.
High Yields On Dividends
At least 90% of a REIT`s taxable income must be paid out as dividends to shareholders. Because of this, many REITs offer enticing dividend yields, giving investors income and possibly raising total returns.
Professional Management
REITs are run by seasoned managers that have extensive expertise in their respective real estate markets. Better decision-making, performance, and access to off-market opportunities that independent investors might not be easily able to locate can all result from this experience.
Gaming REITs: A Contraction-Resilient Investment?
Properties in the gaming and entertainment industries have a history of enduring economic downturns. A recent Yahoo article claims that while there are no assurances, gaming businesses like Gaming & Leisure Properties (GLPI) can fare better during recessions.
When there is a recession, people frequently look for inexpensive leisure options, like gambling, as they limit their discretionary spending. Gaming REITs, which own and lease the facilities where gambling and leisure activities take place, typically gain from this development. Additionally, these REITs frequently have long-term lease agreements with their tenants, giving them a reliable and consistent income stream.
Buyer Beware: Always
It is important to remember that past results do not guarantee future outcomes and that there are always dangers associated with investing in gaming REITs; however, the performance of gaming REIT tenants has a significant bearing on the success of these REITs, and tenants` results may be impacted by regulatory modifications, heightened competition, or changes in customer preferences.
In Conclusion
Specialty REITs present an appealing investment option for individuals looking to gain exposure to diverse real estate types and their individual business strategies. The distinctive qualities of specialty REITs, such as their advantages in terms of diversification, exposure to specific markets, high dividend yields, and expert management, make them an appealing choice for investors navigating unpredictable economic situations, and in search of differently-correlated assets for their portfolio.
Gaming REITs in particular may be able to help investors weather economic downturns, but as always, there are no assurances and they should carefully weigh the risks involved. Investors can take advantage of the opportunities offered by specialty REITs by conducting in-depth research and comprehending the distinctive dynamics of each type of property before executing.
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