Halfway through 2017 the global listed sector is performing better than I had expected, up over 7% Total Return in USD terms, although much of this is down to dollar weakness with the sector up just 2% in sterling and flat in euros. But the big moves for a dollar investor have been in Asia (ex Japan) which is up c. 20% and Europe up 14%. The UK is showing a very credible TR of c. 10% in spite of the political uncertainty which is starting to impact domestic business, consumer and investment decisions.
The big moves within the US are interesting with the regional mall REITs down 10%, and strip centers (adopting the US spelling!) down 18%. Given my views on retail, none of this is surprising, but office REITs at <3% TR are slightly disappointing, although industrials/logistics saw a very solid 10% TR. The big wins in the US came from the alternative sectors: data centers up c. 30%, and lodging and healthcare both up 20%. I participated in the data center move but feel short of lodging (I was worried about supply…) and healthcare (the politics!). The data center performance is very material and makes complete sense given the exponential rise in date use and storage, but it is hard to gain listed exposure outside the US. In the UK we have Segro where the data centre portfolio is under-estimated – not only is logistics and last mile demand strong in the UK (and improving in Europe), but the data centre market is also powering ahead with high barriers to entry. Twenty years ago I imagined all data going through the air (or a ‘cloud’ as it turned out) and that data centers would be obsolete, but the need for highly specified physical storage in locations close to major power supplies remains undiminished.