The global property market has been shaken up by the COVID-19 crisis, with the pandemic having sparked significant changes in the way that people live, work, shop and play. In particular, the rapid shift to remote working and online shopping has made life difficult for many office and mall owners. On this basis, investing in a global property exchange-traded fund (ETF) might seem like a bad idea.
However, while some investors do overlook global property on the belief that portfolios are dominated by large shopping centres and high-rise office blocks, these funds have evolved to be more reflective of the times we live in.
The composition of the CoreShares Global Property ETF may prompt some investors to change their assumptions about investment products focused on the sector.
The first thing to notice is that the Specialised Real Estate Investment Trusts (REITs) category is the largest sub-sector, accounting for a fifth (21%) of the fund’s exposure. This segment is followed by Industrial (16%) and Residential (14%). Interestingly, the three smallest allocations are Real Estate Development, Office REITS, and Retail REITS – arguably the more traditional segments. Their combined weighting is only marginally bigger than the allocation towards Specialized REITs.
The main sub-sectors, which we outline in more detail below, are actually closely aligned to the post-COVID-19 economy.
This segment refers to unique property portfolios outside of the traditional office and retail space. And they are no longer niche – they dominate the global property landscape. They include data centres (think cloud computing and data warehousing), self-storage facilities and gaming properties.
The second largest sub-sector is Industrial REITs. Landlords in this category are focused on logistics, distribution centres and warehousing. This segment is the backbone of global trade, supply chains, and importantly, ecommerce.
Landlords in this segment – the most traditional of the top three sub-sectors – are focused on urban apartments (from luxury housing in New York to entry-level accommodation in Tokyo), manufactured home communities, single family homes, and residential communities.
With this in mind, it may well be time for investors to reconsider their assumptions about the global property market, and to ensure that they have allocations towards this important category. This can be done through a diversified, low-cost fund such as the CoreShares Global Property ETF.
We believe that global property is an essential building block within a portfolio, and one that acts as both a diversifier and a long-term growth driver.
For more information, visit the Coreshares Global Property fund page.