The industrial sector has been one of the few bright spots in real estate this year. The average industrial REIT has delivered a nearly 9% total return, vastly outperforming the FTSE Nareit All Equity REIT Index's 12% negative total return.
There's still plenty of upside in the sector, given the continued need for industrial space. Because of that, several REITs look like intriguing buys this month, led by Americold Realty (NYSE: COLD), Duke Realty (NYSE: DRE), and W.P. Carey (NYSE: WPC).
Gobbling up more of the cold storage market
Americold Realty is the only publicly traded REIT focused on owning temperature-controlled warehouses. It's currently the No. 2 player both in the U.S. and globally, with market shares of 18% and 4.4%, respectively. That position is about to get even bigger as it recently agreed to acquire the No. 4 player in both markets.
That acquisition is one of several the company has announced this year as it continues to consolidate the global temperature-controlled warehouse market. Add that to its backlog of development projects to support the sector's expansion, and this REIT should be able to continue growing its FFO and dividend. That should give it the fuel to maintain its market-beating pace as it has outperformed the S&P 500 by a wide margin since its IPO in 2018.
Speculating that demand will remain red hot
Duke Realty is one of the leading owners of logistics properties in the country, with roughly 159 square feet in 20 top markets. Demand for this space has been hotter than expected this year because of COVID-19. Not only did the pandemic accelerate the adoption of e-commerce, but it also made companies rethink their warehouse needs so that they have enough inventory in case of future supply chain disruptions.
Duke Realty is in an excellent position to cash in on this trend. It currently has a 7 million-square-foot development pipeline, 63% of which it has already pre-leased to tenants. Demand for industrial space has been so hot this year that the company recently started two new speculative developments. As these and other projects come online, they'll help expand Duke Realty's FFO and dividend, which should enable the REIT to continue producing healthy total returns.
Continuing to grow its industrial exposure
W.P. Carey is technically a diversified REIT as it owns properties in the industrial, office, retail, and self-storage sectors as well as several others. However, 47% of its portfolio is either warehouse or other industrial properties, making it an excellent way for investors to gain exposure to this sector.
That space has been a major focus of the company this year as it has acquired several facilities leased to industrial tenants. Its most recent deals included $91 million in sale-leaseback transactions for four manufacturing facilities, a $34 million sale-leaseback of a refrigerated food processing and distribution facility, and a $44 million sale-leaseback deal for two state-of-the-art food manufacturing facilities. As these acquisitions showcase, the company's diversification gives it free rein to buy properties across the industrial sector (as well as others) as it finds good deals. That strategy has paid dividends over the years as the REIT has increased its payout every single one since its IPO in 1998.
Great ways to get exposure to the growing industrial sector
The demand for industrial space continues to grow as it's vital to support e-commerce and the manufacturing industry. That's enabling REITs focused on the sector to expand via acquisitions and development projects. This growth should allow them to continue enriching their investors by steadily increasing dividends.