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Investing in Warehousing with REITs

While warehousing investment can be a profitable business, purchasing and renting a warehouse requires too much capital and is also risky. Here's why REITs may be a better option.

Investing in Warehousing with REITs
Workers inspecting shipments in a warehouse

Investing in warehousing can be a good business. But for most retail investors, buying and renting a warehouse requires too much capital. And it can be risky!

That is why REITs might be the better choice.

Why Invest in Warehousing?

Several trends favor warehousing investments. First, there is a shortage of warehouse space already. Warehouse vacancy in the US has reached 3.6%, which is a record low, according to recent data from the real estate firm CBRE.

"In an efficient supply chain, you want about 15% availability of warehouse capacity in these markets and across the country," said Craig Fuller, CEO of the global logistics industry data and analytics company FreightWaves.

The main reason why warehouses are overloaded is the e-commerce boom. Especially since the onset of the COVID-19 pandemic, consumers are ordering much more online. As that is not likely to stop any time soon and may even accelerate in the future, warehouse demand will likely keep on increasing.

What Are REITs?

REIT stands for Real Estate Investment Trust. Those are real estate companies that are listed on the stock market. They manage a portfolio of real estate assets and raise money from investors to expand their portfolios. 

Investors benefit from the capital appreciation of the assets and the dividend issued by the REITs. Under US law, a REIT generally must distribute at least 90% of its taxable income annually in qualifying dividends.

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How Can You Invest?

Investors can buy REITs via their bank or stock broker, just like any other stock. There are also REIT ETFs. ETF stands for Exchange Trade Fund, meaning funds that bundle several assets together in one fund. 

REIT ETFs include several REITs and make them available to retail investors as one asset. The advantage of these ETFs is that they lower the investment risk, as more assets are included in the portfolio. 

For investors seeking diversified exposure to warehousing, REITs or REIT ETFs that specialize in warehouse assets are the way to go.

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