I’ve owned a few stocks in my portfolio for many years, but I’m more of a newbie to the world of REITs, or Real Estate Investment Trusts. It’s not as if REITs are in any way inferior to stocks. It’s just that I didn’t really start branching out until I found out more about them.
What I really like about owning REITs is that they tend to pay above-average dividends. This is money that I can reinvest and build even more wealth with.
In addition, REITs add diversity to my portfolio. While the stocks I own are spread across a range of market sectors, including REITs in my personal mix gives me even more room for growth and protection during times of volatility.
In the meantime, there’s one particular REIT that I have my eye on for 2022. And you might also want to consider owning it.
The industrial room could really explode
The pandemic has significantly changed the way consumers shop. Over the past two years, consumers have increasingly turned to e-commerce rather than brick-and-mortar stores. Initially, this may stem from health concerns, and that’s understandable. But now, with the widespread availability of vaccines and high-quality masks, online shopping may be more a function of convenience than an actual necessity.
Either way, digital sales are booming. Total e-commerce sales for 2021 were estimated at $870.8 billion, up 14.2% from 2020, according to the US Census Bureau. And this momentum is unlikely to let up.
So I think now is a good time to invest in industrial REITs. So, I’d like to own shares of the largest industrial REIT in the world – prologue (PLD 3.57% ).
Prologis operates an extensive network of warehouses and industrial facilities in the United States, South America, Europe and Asia. It also offers bespoke warehousing solutions — an important thing at a time when so many retailers are stepping up their e-commerce game.
But what makes Prologis such a good buy right now is the fact that storage space is actually at a premium. And as more companies increase their digital sales, the need for this space increases. Prologis is in an excellent position to capitalize on this boom.
In January, Prologis CEO Hamid R. Moghadam said demand for the company’s 1 billion square foot portfolio had shown no signs of slowing down. And as supply chains ramp up and recover from the bottlenecks that have plagued retailers in the second half of 2021, space needs should increase.
In the fourth fiscal quarter of 2021, Prologis’ average occupancy rate for its owned and managed portfolio was an impressive 97.4%. The company also had a solid liquidity position with $5 billion in cash and the availability of its credit facilities at year-end. Looking ahead to 2022, Prologis expects an average utilization rate of 96.5% to 97.5%, which is in line with recent numbers.
Is Prologis a purchase?
To be clear, Prologis isn’t a bargain REIT. But for me, it’s a REIT worth owning because of the potential for massive growth and demand in the inventory space.
As more consumers shop online, department stores become more important. I want to use this shift to my financial advantage at a time when companies are more likely than not to pay a premium for industrial space.
This article represents the opinion of the author, who may disagree with the “official” endorsement position of a Motley Fool premium advisory service. We are colourful! Challenging an investing thesis — including one of our own — helps us all think critically about investing and make decisions that help us be smarter, happier, and wealthier.