Experienced real estate investors know that one of the primary fundamental measures of strength is occupancy rate. Those market participants also know that owing to the depth of the real estate sector, occupancy rates aren’t linear across the space. But those metrics are important in all subgroups.
The extent to which landlords are filling space is also pertinent to investors evaluating ETFs such as the ALPS Active REIT ETF (REIT). The fund is an actively managed ETF with exposure to seven groups of real estate investment trusts (REITs). That number can change due to REIT being actively managed, but what doesn’t change is the importance of occupancy rates.
Following the coronavirus pandemic, much attention has been paid to declining occupancy rates in office buildings in some cities. That was a byproduct of the work-from-home trend caused by the global health crisis. However, occupancy rates in other REIT segments remain solid, and the ALPS ETF is responsive to that trend.
REIT Exposures Matter
As noted above, REIT has exposure to seven corners of the real estate sector. Some of those are among the best when it comes to high levels of leased space.
“Occupancy rates are indicators of property fundamentals that reflect the interaction of supply and demand. Focusing on the four traditional property types, recent data indicate that, on average, REIT industrial, apartment, and retail occupancy rates have continued to exceed 95%,” according to Nareit research. “Apartment, retail, and office REITs have also enjoyed higher occupancy rates than their private market counterparts.”
