1 real estate sector I would invest in and 1 I would actively avoid

Investing in real estate is something I’ve been doing more in the past few years. But that doesn’t mean I went out and bought properties.

In fact, I don’t have the time or patience to manage a rental property, and since mid-2020 housing stock is actually extremely low. This caused house prices to rise. And since I’m not one to needlessly overpay for anything, I’ve made it a point to focus my real estate investment strategy on a product that doesn’t come with an MLS listing – REITs.

REITs, or real estate investment trusts, are corporations that derive income from the properties they own and rent. Within the realm of REITs, there are various sectors in which investors can consider getting into. And while there is one sector that I think is a great buy right now, there is also one specific REIT sector that I want to stay away from.

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A solid option to consider for your wallet

The pandemic has significantly changed consumer behavior. When the epidemic first broke out and vaccines were either non-existent or in short supply, many consumers began ordering products online to avoid the risks of in-store shopping.

Today, two years later, e-commerce is not slowing down. While the widespread availability of vaccines may make in-person shopping safer, many people are, by this point, used to the convenience of placing orders online and having them delivered to their doorsteps. And this trend should continue.

That’s why now is a good time to invest in industrial REITs – companies that own warehouses, distribution centers and other properties that are instrumental in distributing goods to consumers. In fact, many retailers are changing their own strategies in light of the e-commerce boom and investing more resources in fulfillment centers, spending less on store renovations or new store locations. And given that the demand for industrial space is likely to grow exponentially in the coming years, this specific REIT sector could be a huge source of revenue.

An area to avoid

While the pandemic has caused a change in the way people shop, it has also changed the way they work. These days, many employees continue to do their jobs remotely amid the growing availability of full-service remote jobs. That makes office REITs a more precarious investment right now.

That’s not to say the office building is about to become obsolete. Many major players in the corporate world believe that remote work is not, in fact, the wave of the future.

But consider what the business landscape looks like today compared to two years ago. Before the pandemic, remote work was largely something that was approved only on an ad hoc basis. These days, that’s pretty much the norm to some extent.

Of course, many large companies have employees who report to the office. But are most employees returning to five days of in-person work each week? No. And that alone puts office REITs in a tough spot.

Of course, in-person work could resume as society learns to coexist with COVID-19. But I’m not convinced that we’ll ever return to a place where showing up to the office five days a week will become the norm across the board. For this reason, I am not looking to add office REITs to my portfolio anytime soon.

It’s a personal choice

Some people may think that the industrial real estate market is oversaturated or will become so as more and more warehouses and distribution centers appear. And some believe that office REITs are likely to recover and are therefore a good buy.

Ultimately, your best bet is to do your own research when deciding how to invest your money. But for me, industrial REITs are a buy right now, and office REITs are an investment I wouldn’t touch with a 10-foot pole.