9/19/2016 | By Sarah Borchersen-Keto
Equity REITs and other publicly traded real estate companies were officially elevated to a new Real Estate Sector in the Global Industry Classification Standard (GICS), after the close of trading Sept. 16.
S&P Dow Jones Indices implemented the changes to coincide with their annual rebalance.
Equity REITs and other publicly traded real estate companies were moved out from the Financials Sector and into a standalone 11th sector. Mortgage REITs remain in the Financials Sector.
Brad Case, NAREIT’s senior vice president for research and industry information, said the change is an important development, “not mainly because it will bring additional capital to exchange-traded Equity REITs, but also because it greatly increases the visibility of the real estate asset class.”
He said the move is likely to reduce volatility for REITs relative to non-REIT stocks and reduce short-term correlations between REITs and other assets, enhancing the diversification benefits of exchange-traded Equity REITs.
Under the GICS four-tier classification system, the broad Real Estate Sector will house the Real Estate Industry Group, which is separated into the Equity REITs Industry and the Real Estate Management & Development Industry. Those two industries are divided into Sub-Industries to create the fourth and final tier.
Equity REITs will be classified in the following eight Sub-Industries:
- Diversified REITs;
- Industrial REITs;
- Hotel & Resort REITs;
- Office REITs;
- Health Care REITs;
- Retail REITs;
- Residential REITs; and
- Specialized REITs.
Real Estate Management & Development companies will include the following Sub-Industries:
- Diversified Real Estate Activities;
- Real Estate Operating Companies;
- Real Estate Development; and
- Real Estate Services.