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4 Global REIT ETFs for Solid Income & Capital Gains

Sanghamitra Saha
Duke Realty's (DRE) construction of the warehouse on a speculative basis seems a strategic fit as the market enjoys low vacancy rate and fewer sites for new development projects.

The real estate corner of the broad market – domestic and international – has been an area to watch lately given the Fed’s dovish stance that has kept the rates subdued and increased the appeal for the rate-sensitive stocks.

Additionally, still-unresolved U.S.-China trade war, global growth issues and Brexit concerns -- especially about what might happen after Theresa May’s resignation -- are making global investors jittery, boosting demand for safe-haven assets, which lowers yields.

The month of May has been crucial for the global markets. The S&P 500 (down 4.8%), the Dow Jones (down 4.5%) and the Nasdaq (down 6.8%) were in red in the past month (as of May 28, 2019). All-world ETF iShares MSCI ACWI ETF ACWI has lost 4.9% in the past month.

Flight to safety thus pushed the benchmark U.S. treasury yield to a 19-month low. The 10-year U.S. treasury yield is trading below that of the one-month, two-month, three-month, six-month and one-year for the last three days (as of May 28, 2019) (read: 10-Year Yield Below One-Year: Play Leveraged Bond ETFs).

Since real-estate sectors perform better in a low-rate environment, these stocks have every reason to beat the broader market in May. U.S.-based Vanguard Real Estate Index Fund ETF Shares VNQ has gained 1.4% in the past month. Also, these stocks are high-yielding in nature, which gives investors another reason to binge on the space in this low-yield environment.

Global Rates to Remain Low Ahead

Dovish central banks in most of the developed markets have also been helping the operating backdrop of the real estate market. Both Euro zone and Japan have been practicing record-low interest rates. Per ECB's Governing Council member Olli Rehn, the first rise in interest rates has now shifted away from where it was a few months ago.

Investors are wagering on the fact that the Federal Reserve will slash U.S. interest rates not once but twice this year, to tackle ripple effects of slowing global economic growth and trade-war-induced U.S. economic slowdown.

Why Global Real Estates

This sticky situation could prove to be a boon for global real estate stocks as some key developed economies are still decently positioned, data-wise. The U.S. economy has grown 3.2% in the first quarter. The Eurozone’s economic growth was 0.4% in the first quarter of 2019, above the previous three-month period's expansion of 0.2%. The Japanese economy too grew by 0.5% sequentially in Q1, crushing market expectations of a 0.1% contraction.

ETFs to Pick

Cohen & Steers Global Realty Majors ETF GRI – Up 1.7% in the past month

The underlying Cohen & Steers Global Realty Majors Index consists of the largest and most-liquid securities within the global real estate universe. North America holds about 55.8% of the fund followed by Japan (10.4%) and Hong Kong (9.6%). It yields 2.99% annually.

iShares Global REIT ETF REET – Up 1.2%

The underlying FTSE EPRA/NAREIT Global REIT Index is designed to track the performance of publicly-listed real estate investment trusts in both developed and emerging markets. It yields 5.07% annually. The United States takes about 65.2% of the fund followed by Japan (8.2%) and Australia (5.8%).

iShares International Property ETF WPS – Up 0.7%

The underlying S&P Developed ex-U.S. Property Index is a free float-adjusted, market capitalization-weighted index. It yields 4.14% annually. Japan (28.5%), Hong Kong (16.7%) and Australia (10.5%) are the top three geographies of the fund.

iShares International Developed Real Estate ETF IFGL – Up 0.2%

The underlying FTSE EPRA/NAREIT Developed Real Estate ex-U.S. Index measures the stock performance of companies engaged in the ownership, disposure and development of the Canadian, European and Asian real estate markets. Again Japan (24%), Hong Kong (17.5%), Australia (10.2%) and Germany (10.1%) are the top three geographies of the fund. The fund yields 3.78% annually. 

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iShares Global REIT ETF (REET): ETF Research Reports
 
iShares International Developed Real Estate ETF (IFGL): ETF Research Reports
 
iShares International Developed Property ETF (WPS): ETF Research Reports
 
ALPS Cohen & Steers Global Realty Majors ETF (GRI): ETF Research Reports
 
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