The World’s Largest Real Estate Investment Trusts (REITs)

One of the easiest ways to gain exposure to real estate is by purchasing shares in a real estate investment trust (REIT).

REITs are one of the easiest ways to invest in real estate, and they come with several key benefits.
There are two benefits to this, they are diversification and inflation hedging. It helps in diversification because of less correlation with stocks, and the income is monthly.

What Qualifies as REIT?

To qualify as a REIT in the U.S., a company must meet several criteria:

• Invest at least 75% of assets in real estate, cash , or U.S. Treasuries
• Derive at least 75% of gross income from rents, interest on mortgages, or real estate sales
• Pay at least 90% of taxable income in the form of shareholder dividends
• Be a taxable corporation
• Be managed by a board of directors or trustees
• Have at least 100 shareholders after one year of operations
• Have no more than half its shares held by five or fewer people

Investing in a REIT is similar to purchasing shares of any other publicly-traded company.

There are also exchange-traded funds (ETFs) and mutual funds which may hold a basket of REITs.

Lastly, note that some REITs are private, meaning they aren’t traded on stock exchanges.

The Top 10 by Market Cap

Here are the world’s 10 largest publicly-traded REITs, as of March 25, 2022.

REIT	Market Cap	Dividend Yield	Property Type
Prologis (NYSE: PLD)	$116.4B	2.03%	Industrial
American Tower (NYSE: AMT)	$109.8B	2.38%	Communications
Crown Castle (NYSE: CCI	$76.8B	3.35%	Communications
Public Storage (NYSE: PSA)	$65.9B	2.14%	Self-storage
Equinix (NYSE: EQIX)	$64.4B	1.74%	Data centers
Simon Property Group (NYSE: SPG)	$48.9B	5.07%	Malls
Welltower (NYSE: WELL)	$43.0B	2.58%	Healthcare
Digital Realty (NYSE: DLR)	$40.1B	3.55%	Data centers
Realty Income (NYSE: O)	$40.1B	4.44%	Commercial
AvalonBay Communities (NYSE: AVB)	$34.6B	2.62%	Residential

As shown above, REITs focus on different sectors of the market. Understanding their differences is an important step to consider before making an investment.

For example, Prologis manages the world’s largest portfolio of logistics real estate. This includes warehouses, distribution centers, and other supply chain facilities around the globe. It’s reasonable to assume that this REIT would benefit from further growth in ecommerce—more on this near the end.

Realty Income, on the other hand, owns a portfolio of over 11,100 commercial real estate properties in the U.S. and Europe. It rents these properties out to major brands like Walgreens and 7-Eleven, which together account for 8.1% of the REIT’s annual income.

More Than Just Buildings

Cell towers and data centers may not seem like “real estate”, but they are both critical pieces of modern infrastructure that take up land.

REITs that focus on these sectors include American Tower and Crown Castle, which own wireless communications assets in the U.S. and abroad. They are likely to benefit from the increased adoption of 5G networks and the Internet of Things (IoT).

On the other hand, Equinix and Digital Realty are focused on data centers, a fast growing industry that is benefitting from digitalization. Both of these REITs work with major tech firms such as Amazon and Google.\

Trends to Watch

As more people flock to cities in search of a better life, the demand for housing skyrockets. The best way to profit from these global trends is to invest in real estate investment trusts (REITs), which offer a convenient and liquid way to do so.

There’s also the rising prevalence of ecommerce, which has triggered a boom in demand for warehouse space. This is best captured by Amazon’s massive growth during the COVID-19 pandemic, during which the company doubled the number of its warehouse facilities.

Globally, ecommerce accounts for just 19.6% of total retail sales. Should that figure continue to rise, industrial real estate prices could be in store for robust, long-term growth.

Happy Investing! 😉