Escaping the Shadow of COVID-19... US REIT ETFs Growing Rapidly

US REITs Yield Improves This Year
Economic Recovery Absorbed by Real Assets

[Image source=Yonhap News]

[Asia Economy Reporter Junho Hwang] This year, the returns on U.S. REITs (Real Estate Investment Trusts) ETFs invested in by South Korea have surged sharply. As signs of recovery in the U.S. real economy translate into the real economy, it is being analyzed that REITs ETF returns are gradually emerging from the shadow of COVID-19.

On the 30th, the U.S. REITs Association announced that the REITs Total Return Index (TR) has risen to pre-pandemic levels. This index recorded a return of 2.1% from February last year, one month before COVID-19 escalated to a pandemic level, until now. Although the index fell by 41.9% in the one-month period from February to March last year, it gradually gained momentum reflecting signals of economic recovery such as vaccine supply.

The recovery trend in the U.S. real economy is leading to improved returns in domestic overseas funds. Since its launch in May last year, Samsung Asset Management's KODEX Dow Jones U.S. REITs Real Estate ETF has recorded a return of 32.05% to date. Notably, the return over the past three months accounts for about half of this, at 14.05%, indicating a steep economic recovery. Korea Investment KINDEX Dow Jones U.S. REITs has also earned 13.36% over the past three months.

As the economic recovery accelerates, REITs ETF returns are expected to increase further. Currently, the office vacancy rate in Manhattan, New York (according to Cushman & Wakefield) stands at 16.3%, the highest since 1994. If the vacancy rate decreases due to vaccine administration, it could significantly contribute to improving REITs ETF returns. Additionally, U.S. President Joe Biden's infrastructure investment plan worth 2.25 trillion won is expected to positively impact the returns of communication infrastructure sectors such as data centers and utility poles, which are currently playing a major role in enhancing REITs ETF returns.

An asset manager of a domestic asset management company operating REITs ETFs stated, "The recovery order of REITs investment assets is expected to be retail, office, healthcare, and then hotels and resorts," adding, "Given the current phase where rental demand is expanding and rents are rising, a positive outlook on REITs investment is considered possible."