REIT Property Sectors
REITs in the Sector: 17 Sector Market Cap: $ 144,218 m Avg. Dividend Yield: 5.59%
Healthcare REITs invest in the real estate of hospitals, medical office buildings, assisted living facilities, senior living facilities, and memory care facilities. The success of this real estate is directly tied to the healthcare system, so an increase in the demand for healthcare services (the “silver tsunami”) is generally good for healthcare real estate.
REITs in the Sector: 15 Sector Market Cap: $ 45,711 m Avg. Dividend Yield: 6.52%
Lodging REITs own and manage hotels and resorts, and rent out the rooms on those properties to guests. They are categorized by class based on features such as their level of service and amenities (i.e., limited service, full-service, etc.). Lodging REITs cater to a wide array of customers, from business travelers, to event coordinators, to vacationers.
Net Lease REITs
REITs in the Sector: 14 Sector Market Cap: $ 88,639 m Avg. Dividend Yield: 4.75%
Net lease REITs generally rent out properties with long-term leases (10-25 years) to high credit-quality tenants, usually in the retail and restaurant spaces. Operating under triple-net lease structures, their tenants pay all expenses related to property management: property taxes, insurance, and maintenance.
REITs in the Sector: 14 Sector Market Cap: $ 73,653 m Avg. Dividend Yield: 4.79%
Office REITs invest in office buildings. They receive rental income from tenants who have usually signed long-term leases and typically perform better in densely populated gateway markets. Due to higher improvement and leasing costs, they do, however, require considerably more money to manage than many other REIT properties.
Shopping Center REITs
REITs in the Sector: 13 Sector Market Cap: $ 50,984 m Avg. Dividend Yield: 5.28%
Shopping center REITs own retail strip centers such as power centers, grocery-anchored centers, and street-level urban retail. In recent years, many of them have transformed their tenant mix into more “experience-oriented” portfolios. Though the high-quality ones continue to see steady demand for centrally-located retail space regardless.
REITs in the Sector: 14 Sector Market Cap: $ 108,892 m Avg. Dividend Yield: 3.76%
Industrial REITs invest in real estate used for storage, distribution, manufacturing, production, and research and development. Global demand for logistics facilities, these REITs primary real assets, remains healthy due to their critical role moving goods from producer to ultimate end consumers.
Commercial Mortgage REITs
REITs in the Sector: 12 Sector Market Cap: $ 26,306 m Avg. Dividend Yield: 8.17%
Commercial mortgage REITs act as finance companies that operate much like a bank, either as pure balance sheet lenders or balance sheet/conduit lenders. The first category originates loans in order to hold them on their books, while balance sheet/conduit lenders do so for both their own books and to sell into securitized markets such as CMBS.
REITs in the Sector: 10 Sector Market Cap: $ 112,401 m Avg. Dividend Yield: 3.72%
Apartment REITs own and manage various forms of residences (e.g., apartment buildings, luxury apartments, etc.), which they then use to rent out space to tenants. These REITs focus on specific geographical markets and they often exhibit less sensitivity to rising or falling interest rates than the average REIT.
REITs in the Sector: 9 Sector Market Cap: $ 88,484 m Avg. Dividend Yield: 15.61%
Mall REITs own and manage malls and outlet centers, falling into three rankings: A, B, or C largely depending on their tenant sales per square foot. While top-tier malls continue to perform well across all metrics, including average rent and occupancy, less productive malls have struggled in fundamentals and stock price since the end of the recession.
Other Property Sector REITs
REITs in the Sector: 8 Sector Market Cap: $ 18,556 m Avg. Dividend Yield: 6.82%
Other Property Sector REITs include the diversified property REITs and those that don’t fit into one distinct property category. It’s expected that new REIT property sectors could be added in the future such as the ones below, such as airport REITs, vet REITs, parking garage REITs, military housing REITs and nuclear power station REITs.
REITs in the Sector: 6 Sector Market Cap: $ 72,536 m Avg. Dividend Yield: 3.79%
Self-storage REITs own and manage storage facilities and collect rent from customers, both individuals and businesses. The properties require the least amount of capital expenditure in order to build and maintain (as compared to other property sectors) and this means expenses are modest. They also perform well during recessions.
REITs in the Sector: 5 Sector Market Cap: $ 90,384 m Avg. Dividend Yield: 2.92%
Data center REITs own and manage facilities that safely store data. They offer a range of products and services to help keep servers and data safe, including uninterruptable power supplies, air-cooled chillers, and physical security. They are driven by a steady and growing demand accelerated by artificial intelligence and cell phone usage.
REITs in the Sector: 4 Sector Market Cap: $ 27,683 m Avg. Dividend Yield: 4.42%
Timber REITs own and manage various types of timberland real estate that specialize in harvesting and selling wood. There are both sector and location-specific risks associated within each business line, such as operations, land sales, development, and manufacturing issues, which can be more leveraged to lumber and wood prices.
Manufactured Housing REITs
REITs in the Sector: 3 Sector Market Cap: $ 26,103 m Avg. Dividend Yield: 2.94%
Manufactured Housing REITs own, lease, and finance manufactured/mobile home communities (rental parks.), recreational vehicle and/or similar communities. Manufactured homes are aiding in residents’ search for affordable housing, and demographics are driving the demand for customers in this sector.
REITs in the Sector: 3 Sector Market Cap: $ 27,294 m Avg. Dividend Yield: 6.0%
Gaming REITs own and manage property leased to gaming operators in triple-net lease arrangements. They are separate from their operating casinos that operate the casinos, since the REITs typically utilize sale/leaseback structures. That means that gaming REITs are essentially a sub-sector of the net lease REIT category.
Single Family Rental REITs
REITs in the Sector: 2 Sector Market Cap: $ 22,837 m Avg. Dividend Yield: 1.24%
Single-family rental REITs are one of the youngest REIT sectors out there, having just emerged after the end of the housing crisis. The business model has evolved into a stabilized ownership model more similar to the average apartment REIT. Fundamentals are strong, driven by rising home values, limited supply, and robust demand.
REITs in the Sector: 2 Sector Market Cap: $ 4,241 m Avg. Dividend Yield: 10.31%
Prison REITs own and manage correction and detention facilities such as jails, and state and federal prisons. These companies also partner with various levels of government to manage state and federal-owned facilities, and they currently operate around 75% of the for-profit prison market in the United States.
REITs in the Sector: 2 Sector Market Cap: $ 444 m Avg. Dividend Yield: 4.72%
Farmland REITs own and manage domestic farmland – a highly fragmented asset class that is still largely owned by family farmers. Farmland is a real asset tied to a megatrend – rising global food demand. The middle class is expected to grow from 1.8 billion in 2010 to 4.9 billion in 2030, with 85% of that growth coming from Asia.
Cell Tower REITs
REITs in the Sector: 2 Sector Market Cap: $ 156,537 m Avg. Dividend Yield: 2.32%
Cell tower REITs own roughly 80% of the 100,000 macro cell towers in the United States, which is by far the highest concentration of REIT ownership of any real estate sector. The relative scarcity of cell towers, combined with their absolute necessity for cell networks, has given these REITs substantial pricing power.
REITs in the Sector: 2 Sector Market Cap: $ 11,765 m Avg. Dividend Yield: 5.07%
Billboard REITs own, manage, and operate digital and static displays in the U.S. Being in the ad business, investors should recognize their associated erratic CapEx requirements. Also, some of these REIT’s underlying assets could be subject to uncontrollable risks (e.g., economic, governmental, and competitive) as well as declining revenue.
Campus Housing REITs
REITs in the Sector: 1 Sector Market Cap: $ 6,444 m Avg. Dividend Yield: 3.94%
Campus housing REITs own and manage student housing properties in the United States. Modernizing student housing has mostly taken the form of new development, although some markets have buildings that can be renovated to meet students’ needs. Campus housing REITs are essentially a subsector of apartment REITs.