I’m sure everyone is sick of hearing about the coronavirus outbreak but it did get me thinking what the impact on REITs would be.
So far REIT’s have been punished with IYR falling from $100 to below $60 and is currently trading around $70. That’s a pretty big drop for a defensive sector. Yes, there will be certain REIT sectors that will be impacted badly like Hotel and Retail REITs, but others should be relatively immune and perhaps even do well from the fallout.
According to a recent Bank of America Report, these are the REIT sectors that should hold up well during this crisis:
Data Centers – These could become even more vital in the new world as more and more business move online.
Healthcare – Medical office buildings, hospitals, and life sciences could all benefit from the COVID-19 outbreak due to a rise in patient visits.
Self-storage – Demand could remain steady even in an economic downturn
Wireless Infrastructure – Mobile data usage is growing steadily and is unlikely to decline much even in a slowing economy.
Two REITS holding up very well so far in this downturn are Crown Castle (CCI) and Digital Realty (DLR).
Crown Castle own a communications towers which are vital to the rollout of 5G. So far the stock has only dropped from $166 to $137.
Digital Realty operates 267 data centers leased to more than 2,000 customers. The company has expanded rapidly in recent years and that shows no sign of slowing down with continued demand for cloud-based applications. DLR has hardly dropped at all moving from $137.50 in late February to a current price of $132.85.
So it’s not all doom and gloom out there and some companies should not be impacted much at all from the economic slowdown.
Trade safe!
Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.
