Commercial Real Estate Sub-Sector Breakout (RTL, FIO, REZ)

Back in April 2009 in Commercial Real Estate Sub-Sectors ETF to Watch, I highlighted three commercial real estate sub-sector REIT ETFs, discussed their composition and included a performance graph going back to the date of the Lehman Brothers bankruptcy, September 15, 2008. The three REIT ETFs are:

  • FTSE NAREIT Retail Capped Index Fund (NYSE:RTL) – emphasis on shopping centers (46%) and regional malls (43%)
  • FTSE NAREIT Industrial/Office Capped Index Fund (NYSE:FIO) – mostly office (66%), but some (21%) industrial
  • FTSE NAREIT Residential Plus Capped Index Fund (NYSE:REZ) – apartments (47%) dominate, but with a healthy dose (37%) of health care

I have updated the performance of each of these real estate sectors in the chart below, which reflects all dividends and also begins from the date of the Lehman Brothers bankruptcy filing. This time around, instead of updating the graphic, I have elected to use an chart, as it adds some numbers to the chart, notably total return statistics as well as historical volatility and drawdown data.

Note that the residential real estate ETF, REZ, has rallied to where it is currently trading 8.1% above its pre-Lehman level and comfortably above the April 2010 high. On the other hand, the highly correlated industrial/office real estate ETF (NYSE:FIO) and retail real estate ETF (NYSE:RTL) are still both more than 15% below their pre-Lehman levels and are struggling to move above their April 2010 highs.

Real estate is a multi-dimensional beast and these three sub-sector ETFs can assist investors in understanding which parts of the real estate market are showing relative strength and which are demonstrating relative weakness.

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Bill is a private investor who also authors the VIX and More ( blog and an investment newsletter from just north of San Francisco. His research and trading interests focus on volatility, market sentiment, technical analysis, and ETFs. Prior to becoming a full-time investor, Bill was a business strategy consultant for two decades and advised clients across a broad range of industries on issues such as strategy formulation, strategy implementation, and metrics. When not trading or blogging, he can often be found running, hiking, and kayaking in Northern California. Bill has a BA from Stanford University and an MBA from Carnegie-Mellon University.

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