2020 Year in Review: Investing in Real Estate Stocks and REITs

The real estate sector started 2020 on a rather high note, but that all changed as the COVID-19 pandemic swept across the United States. Since the usage of most types of commercial real estate depends on the ability and willingness of people to leave their homes and physically go places, real estate was one of the worst-performing sectors in the stock market. Even after the recent rebound fueled by positive vaccine data, real estate is significantly underperforming, with the Vanguard Real Estate ETF (NYSE: VNQ) down by 6%, compared with a 13% gain in the S&P 500.

However, that doesn’t tell the whole story. Some types of real estate stocks have held up quite well or outperformed the market, while others have been beaten down tremendously.

Some real estate stocks have done quite well

While the real estate sector as a whole has underperformed the S&P 500, it’s not fair to generalize. Some real estate subsectors have actually performed quite well — specifically, those that either haven’t been affected by or can thrive in a stay-at-home economy.

Data centers are a good example, as millions of people working from home created a growing need for cloud-based data solutions. Industrial REITs, or real estate investment trusts, have benefitted as well, as many of their properties serve as the physical distribution hubs for e-commerce. And finally, tech-focused real estate service providers have been some of the best performers in the entire stock market, fueled by a strong housing market and the increasing need for tech-focused (as opposed to in-person) ways to shop for and sell homes.

Here’s a rundown of some of the largest stocks in each of these categories, all of which have significantly outperformed the real estate sector this year.

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