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There are three segments of the real estate sector and multiple ways to invest, each with their own benefits and risks.
What are real estate stocks?
Real estate sector consists of stocks from companies that own, develop and manage properties. The Global Industry Classification Standard defines 11 stock sectors, each characterised by a specific industry or slice of the market.
The real estate sector can be further broken down into residential, commercial and industrial real estate. Some real estate companies and trusts specialise in buying only one type of property while others manage multiple segments of the sector.
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Ways to invest in real estate sector stocks
The real estate sector is dominated by real-estate investment trusts (REITs): companies that purchase and maintain income properties. REITs are publicly traded trusts that are bought and sold like stocks. They offer the opportunity to participate in real estate an investor might otherwise not have access to, like shopping malls and business parks.
Those looking to explore the real estate sector can invest in REITs or real estate ETFs.
Invest in REITs
If you’d prefer to invest in individual real estate companies, REITs are bought and sold through a brokerage account.
Most trading platforms come with research and analysis tools designed to help you compare and select investments across sectors. Stock screeners can help you narrow your options to investments available in the real estate sector, listing real estate companies and REITs alongside key metrics to help you assess your options.
Pros
- Support individual companies. Investing in REITs gives you the opportunity to back individual companies and trusts based on your interests, values and investment goals.
- Highly liquid. Unlike buying and selling physical property, you can swap REITs online in a matter of minutes.
- Dividends. Like stocks, REITs pay dividends, which can act as a source of income.
Cons
- Limited exposure. To compete with the broad selection of securities available through a single ETF, you’d have to purchase many individual stocks.
- Volatile. REITs are easily influenced by interest rate fluctuations, making them inherently more volatile than ETFs.
Invest in real estate ETFs
An ETF — or exchange-traded fund — is a bundle of securities that track a specific stock sector or market index. Real estate ETFs track REITs and indexes for the real estate market. Instead of purchasing a single stock, ETFs offer access to a collection of stocks in a specific stock market sector, providing more comprehensive exposure.
Like stocks, ETFs can be bought and sold through a brokerage account. When you purchase an ETF, you pay an expense ratio: an annual cost expressed as a percentage of the funds invested and can range from 0.03% to 2.5%.
Popular ETFs in the real estate sector include:
- iShares Cohen & Steers REIT ETF (ICF)
- iShares Core U.S. REIT ETF (USRT)
- iShares U.S. Real Estate ETF (IYR)
- Real Estate Select Sector SPDR ETF (XLRE)
- Schwab US REIT ETF (SCHH)
- SPDR Dow Jones REIT ETF (RWR)
- Vanguard Real Estate Index Fund (VNQ)
Pros
- Low risk. ETFs are less risky than stocks because they’re a collection — not a singular entity. The diversity of ETFs helps safeguard the fund from potential losses.
- Portfolio diversification. Buying into an ETF broadens your portfolio with a single purchase.
Cons
- Lower dividends. Dividends from an ETF may have trouble competing with high-yield stocks.
- ETF fees. While it’s possible to swap stocks commission free, ETFs carry expense ratios that are typically unavoidable.
Take a deeper dive into real estate stocks
If you're interested in investing in the real estate industry, take a closer look at what companies in this industry do and how the stocks have historically performed. Keep in mind that positive past performance doesn't guarantee that a stock will continue to rise in the future.1. Boston Properties (BXP)
Boston Properties (NYSE:BXP) is the largest publicly-held developer and owner of Class A office properties in the United States, concentrated in five markets - Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company is a fully integrated real estate company, organized as a real estate investment trust (REIT), that develops, manages, operates, acquires and owns a diverse portfolio of primarily Class A office space. The Company's portfolio totals 51.
Boston Properties stock opened the day at $50.89 after a previous close of $49.42. The latest price was $50.32 (25-minute delay). Boston Properties is listed on the NYSE, has a trailing 12-month revenue of around USD3.1 billion and employs 780 staff.
- Market capitalization: $8,404,137,984
- P/E ratio: 9.5873
- PEG ratio: 7.0456
2. Crown Castle (CCI)
Crown Castle owns, operates and leases more than 40,000 cell towers and approximately 80,000 route miles of fiber supporting small cells and fiber solutions across every major U. S. market. This nationwide portfolio of communications infrastructure connects cities and communities to essential data, technology and wireless service - bringing information, ideas and innovations to the people and businesses that need them.
Crown Castle stock opened the day at $129.51 after a previous close of $129.46. The latest price was $127.51 (25-minute delay). Crown Castle is listed on the NYSE, has a trailing 12-month revenue of around USD$7 billion and employs 5,000 staff.
- Market capitalization: $56,125,820,000
- P/E ratio: 32.3279
- PEG ratio: 3.3523
3. Equinix (EQIX)
Equinix (Nasdaq: EQIX) is the world's digital infrastructure company, enabling digital leaders to harness a trusted platform to bring together and interconnect the foundational infrastructure that powers their success. Equinix enables today's businesses to access all the right places, partners and possibilities they need to accelerate advantage. With Equinix, they can scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value. . . . .
Equinix stock opened the day at $686.59 after a previous close of $681.70. The latest price was $687.62 (25-minute delay). Equinix is listed on the NASDAQ, has a trailing 12-month revenue of around USD$6.7 billion and employs 12,097 staff.
- Market capitalization: $61,828,608,000
- P/E ratio: 90.05
- PEG ratio: 3.3281
4. Healthpeak Properties (PEAK)
Healthpeak Properties, Inc. is a fully integrated real estate investment trust (REIT) and S&P 500 company. Healthpeak owns and develops high-quality real estate in the three private-pay healthcare asset classes of Life Science, Medical Office and Senior Housing, designed to provide stability through the inevitable industry cycles.
Healthpeak Properties stock opened the day at $21.09 after a previous close of $20.91. The latest price was $20.83 (25-minute delay). Healthpeak Properties is listed on the NYSE, has a trailing 12-month revenue of around USD$2.1 billion and employs 199 staff.
- Market capitalization: $11,065,668,608
- P/E ratio: 22.7303
- PEG ratio: 3.1912
5. SBA Communications (SBAC)
SBA Communications Corporation is a first choice provider and leading owner and operator of wireless communications infrastructure in North, Central, and South America and South Africa. By "Building Better Wireless," SBA generates revenue from two primary businesses " site leasing and site development services. The primary focus of the Company is the leasing of antenna space on its multi-tenant communication sites to a variety of wireless service providers under long-term lease contracts.
SBA Communications stock opened the day at $256.19 after a previous close of $256.41. The latest price was $251.20 (25-minute delay). SBA Communications is listed on the NASDAQ, has a trailing 12-month revenue of around USD$2.6 billion and employs 1,834 staff.
- Market capitalization: $26,674,829,312
- P/E ratio: 60.963
- PEG ratio: 2.2667
6. Simon Property Group (SPG)
Simon is a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group, NYSE: SPG). Our properties across North America, Europe and Asia provide community gathering places for millions of people every day and generate billions in annual sales. . . . . .
Simon Property Group stock opened the day at $104.21 after a previous close of $103.48. The latest price was $103.35 (25-minute delay). Simon Property Group is listed on the NYSE, has a trailing 12-month revenue of around USD$5.3 billion and employs 2,500 staff.
- Market capitalization: $38,314,893,312
- P/E ratio: 16.4334
- PEG ratio: 2.059
7. SL Green Realty (SLG)
SL Green Realty Corp. , an S&P 500 company and Manhattan's largest office landlord, is a fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. As of December 31, 2020, SL Green held interests in 88 buildings totaling 38.
SL Green Realty stock opened the day at $20.98 after a previous close of $20.50. The latest price was $20.31 (25-minute delay). SL Green Realty is listed on the NYSE, has a trailing 12-month revenue of around USD$763.4 million and employs 1,137 staff.
- Market capitalization: $1,290,863,104
- PEG ratio: 0.9462
8. Ventas (VTR)
Ventas, an S&P 500 company, operates at the intersection of two powerful and dynamic industries " healthcare and real estate. As one of the world's foremost Real Estate Investment Trusts (REIT), we use the power of capital to unlock the value of real estate, partnering with leading care providers, developers, research and medical institutions, innovators and healthcare organizations whose success is buoyed by the demographic tailwind of an aging population. For more than twenty years, Ventas has followed a successful strategy that endures: combining a high-quality diversified portfolio of properties and capital sources to manage through cycles, working with industry leading partners, and a collaborative and experienced team focused on producing consistent growing cash flows and superior returns on a strong balance sheet, ultimately rewarding Ventas shareholders.
Ventas stock opened the day at $42.63 after a previous close of $42.37. The latest price was $42.91 (25-minute delay). Ventas is listed on the NYSE, has a trailing 12-month revenue of around USD$4.1 billion and employs 451 staff.
- Market capitalization: $18,270,214,144
- PEG ratio: 2.2847
9. Vornado Realty Trust (VNO)
Vornado's portfolio is concentrated in the nation's key market " New York City " along with the premier asset in both Chicago and San Francisco. Vornado is also the real estate industry leader in sustainability policy. The company owns and manages over 23 million square feet of LEED certified buildings and received the Energy Star Partner of the Year Award, Sustained Excellence 2019.
Vornado Realty Trust stock opened the day at $13.91 after a previous close of $13.58. The latest price was $14.03 (25-minute delay). Vornado Realty Trust is listed on the NYSE, has a trailing 12-month revenue of around USD$1.9 billion and employs 3,146 staff.
- Market capitalization: $2,671,768,832
- PEG ratio: 2.5796
How is the real estate sector performing?
The stock market is in constant flux, and individual stocks can change prices second by second. But you can use the performance of ETFs to gauge the average performance of a stock market sector over time. The graph below tracks the Real Estate Select Sector SPDR ETF (XLRE).
Why invest in real estate stocks?
Real estate stocks and ETFs typically offer dividends, which act as passive income. Better yet, real estate assets tend to be viewed as a stable investment, as they’re backed by physical property and often have long-term contracts or lease agreements, which can stabilize incoming cash flow.
Real estate investments can diversify your portfolio, while hedging against inflation. By investing in real estate stocks or funds, you own a piece of a tangible asset without purchasing and maintaining the property firsthand. It’s a practical option for those who want to diversify their portfolio with real estate but don’t want to own their own property.
What unique risks does the real estate sector face?
The profitability of the real estate market is closely correlated with occupancy rates and property values. If property values fall, so will share prices.
REITs also tend to be more volatile than physical properties, so while you benefit from having the property managed on your behalf, you also take on more risk.
Compare trading platforms
If you want to buy stocks or ETFs in the real estate sector, you’ll need to start by opening a trading account.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Bottom line
The real estate sector offers the opportunity for stable dividends backed by physical assets, but isn’t immune to risk. Investors should be wary of shifting property values and occupancy rates before they invest.
Research your trading platform options to find the brokerage account best suited to your needs.
Frequently asked questions
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