By Bansari Mayur Kamdar
(Reuters) – VanEck’s exchange-traded fund (ETF) focusing on office properties edged higher on Friday, a day after tumbling on its debut as fears of interest rates remaining elevated added pressure to a commercial real estate sector already hobbled by the surge in remote work.
The VanEck Office and Commercial REIT ETF fell 4.8% on Thursday after the U.S. Federal Reserve stiffened its hawkish monetary policy stance, slamming the real estate sector and the Real Estate Investment Trusts (REITs) that invest in them.
Real estate stocks have struggled this year as the Fed’s rapid rate hikes make financing properties more expensive, curbing demand.
ETFs tracking broader REITs such as Schwab US REIT and Vanguard Real Estate Index have fallen 4.4% and 5%, respectively, so far this week, while the S&P 500 real estate index is on track to post weekly losses of 4.7%.
“For the discerning investor, the current situation might just be the contrarian opportunity they’ve been waiting for,” said VanEck in its blog about the ETF.
Commercial REITs already faced strains as the expansion of remote work after the pandemic led to a fall in demand for office spaces.
Office REITs like Boston Properties and Kilroy Realty are down 10% and 15%, respectively, so far this year.
“These ETFs are interesting because they’re not always used for very long term holdings,” said Aniket Ullal, ETF data and analytics head at CFRA Research.
“They may also sometimes be used more by traders for taking tactical views or sometimes there is a demand from institutional traders for these specialized sectors.”
The fund has an expense ratio of 0.50%.
(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Kirsten Donovan)
