Why This Real Estate ETF Can Keep Surging

Real estate investment trusts and the relevant exchange traded funds are surging this year, but some non-tradition real estate funds are delivering truly impressive returns.

A prime example of that theme is the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF SRVR.

What To Know

As has been previously noted, SRVR is at the real estate epicenter of some compelling emerging themes, including 5G and increased demands for data storage centers. What gives SRVR an advantage over its more traditional counterparts is that old guard REIT indexes typically lack adequate exposure to REITs with significant data storage and technology exposure.

That's one of the reasons why SRVR is up 18.79 percent year to date, an advantage of about 300 basis points over the Vanguard Real Estate ETF VNQ, the largest domestic real estate ETF.

Why It's Important

Recently, SRVR has been receiving some attention as one of the primary avenues for playing the 5G phenomenon. While that thesis is valid, SRVR is also one of the best REIT ETFs for tapping the exponential growth in data storage centers.

“The average number of data centers per company represented (including edge locations) was 12, expected to grow to 17 over the next three years, based on survey responses,” reports DataCenter Knowledge. “Across these companies. the average number of data centers slated for renovation is 1.8 this year and 5.4 over the next three years.”

The universe of REITs dwelling data storage and infrastructure landscape is small relative to other REIT groups, which explains why SRVR holds just 27 stocks. Just three of those names –- American Tower Corp. AMT, Equinix Inc. EQIX and Crown Castle International Inc. CCI –- combine for over 52 percent of the fund's weight.

What's Next

Growing cloud computing demands are among the expected drivers of data center REITs over the long-term and that could spell big potential with SRVR.

“The worldwide public cloud services market is projected to grow 17.3 percent in 2019 to total $206.2 billion, up from $175.8 billion in 2018,” according to Gartner.

Data center REITs represent over a third of SRVR's weight, making the fund's second-largest industry weight behind infrastructure REITs.

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