Real estate stocks have been lagging the market, but Janus Henderson sees it as an undervalued opportunity. Overall, real estate stocks have begun to rebound, with the S&P 500 real estate sector up 10% over the past month. However, it is one of the index’s worst-performing sectors so far this year, up about 5% compared with the S&P’s 19% gain through Thursday. Still, there’s one sector that’s performed worse than many of its peers: industrial real estate investment trusts. Greg Kuhl, portfolio manager in Janus Henderson’s global real estate equities team, believes that will change. “Supply is going to drop significantly from the second half of this year into next year, while demand for the right product types and the right submarkets seems to be holding up pretty well,” he explained. “There are some very interesting opportunities.” Real Estate Investment Trusts It also pays attractive dividends. .SPLRCR Year-To-Date Mountain S&P 500 Real Estate Sector As the name suggests, industrial REITs own, manage and lease space in industrial facilities. The benchmark Janus uses to measure the entire REIT industry is FTSE Nareit Equity REITs, an index that tracks commercial real estate across the United States. However, its industrial REIT index has a total return of -0.75% year-to-date. The sector was hit hard in April after industrial property giant Prologis cut its full-year outlook, citing economic uncertainty and delayed leasing decisions. However, in July the company raised its full-year guidance. At the same time, construction data suggests supply will decrease, Kuhl noted. In other words, he is selective within the industry. “We believe supply and demand fundamentals are currently more favorable in the Sun Belt and Midwest markets compared to coastal markets, especially California,” he said, adding that California is the largest industrial market in the United States. One of the biggest industrial holdings he’s added to his holdings is EastGroup Properties, a company with exposure to the Sun Belt. The company has a dividend yield of 2.69% and has a smaller square footage. “As we all know, there’s population growth in some of the Sun Belt markets and the products that EastGroup has, what you might call ‘last mile industries’ — closer to where people live, they’re smaller — there’s a lot of demand for that,” Ku said. I said. “You don’t just want to rent to Amazon or FedEx … you can rent to a lot of local small businesses.” Year-to-date EGP Year-to-date EastGroup Properties Another name Kuhl likes is First Industrial Properties Trust Industrial Realty Trust, which has operations across the country and coast to coast, trades at a significant discount to its peers, he said. The stock’s dividend yield is 2.69%. He noted that while the company owns many properties in California that are not yet leased, its advantage is that the buildings are very cheap to build. “They can go out and charge market rent on a building that’s currently vacant, and all of a sudden that’s generating revenue for them,” Kuhl explained. “We don’t think that’s reflected in the stock price.” FR YTD mountain Daiichi Industrial The property trust is also encouraged by Lineage’s initial public offering so far this year, which began trading on Nasdaq on July 25. This is the largest IPO on the market so far this year. Lineage ranks No. 46 on the 2024 CNBC Disruptor 50 list and is the world’s largest temperature-controlled warehouse REIT. “Cold storage is a specialized area of ​​industry that we like, and its supply and demand fundamentals are also more favorable than traditional coastal industries,” Kuhl said. As of Thursday’s close, the stock was up more than 10% from its IPO price of $78. “This is a positive sign for industrial REITs and REITs in general,” Kuhl said.
Janus Henderson sees opportunity in these real estate stocks | Real Time Headlines
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