The last few years have produced many outsized market winners, some with periods of eye-popping results. For example, the pandemic propelled video communications provider Zoom Video and e-commerce platform Shopify into our lives, and these companies experienced fast-tracked growth, condensing multiple years of business gains into a period of months.
It may come as a surprise, but some areas of real estate have also benefitted tremendously from the changes we've witnessed. Persistent headlines about the death of offices and malls might lead you to conclude that commercial real estate is uniformly challenged, which is far from reality.
When considering commercial real estate, what typically comes to mind for many are the offices, apartments, and retail centers we frequently engage with. But there is a growing proportion of the REIT universe outside the traditional sectors historically associated with commercial real estate.
That evolution shows up in the assets represented by real estate investment trusts (REITs), which are professionally managed companies that own and operate diverse real estate assets and are the simplest way to gain access to real estate investments.
A new landscape of commercial real estate
The REIT market has evolved meaningfully in the last 20 years, increasingly supporting and benefitting from the continued evolution of our economy. For example:
- Cell towers are critical infrastructure enabling our daily communications.
- Data centers facilitate the cloud-based platforms modern business has come to rely on.
- Even the traditional industrial sector has evolved to become a central component of our digital society, providing the warehouse and logistics facilities needed to enable the growing prominence of online shopping.
The following chart provides a snapshot of how so-called alternative sectors have become a major part of the overall REIT makeup.