Real Estate Investment Trusts (REITs) have become increasingly popular investment options for those looking to diversify their portfolio and generate steady income. While there are many REITs available on the market, international REITs have the potential to earn higher returns compared to domestic REITs. As different countries experience varying levels of economic growth and stability, international REITs can offer investors the opportunity to capitalize on strong real estate markets in regions where domestic REITs may not perform as well.
In this article, we will explore some of the best international REITs that investors may want to consider for their portfolios.
What Are International REITs?
REITs are companies that own, operate, or finance income-producing real estate in several sectors, such as residential, commercial, retail, or industrial properties. International REITs, also known as global REITs or international property funds, are real estate investment trusts that invest in real estate properties and assets outside the investor's home country. International REITs offer increased diversification by exposing investors to real estate markets and properties worldwide.
Investing in international REITs offers passive investment opportunities in global markets. In this way, REITs offer the benefits of real estate investment without the need for active management.
Top 6 International REITs To Invest In
Consider the following six international REITs for global diversification and long-term returns.
1. Public Storage (NYSE: PSA)
Public Storage is one of the largest self-storage REITs, with a market cap of $49.87 billion. It currently owns more than 199 million rentable square feet, with 1.8 million customers across the globe. Public Storage's primary international exposure comes from Shurgard Self Storage, which owns 253 properties in seven European countries. Shurgard's revenue grew 18% from 2019 to 2021, while net operating income grew 19%.
While Public Storage also has domestic holdings, it has strong internal diversification if the U.S. market weakens. Stock prices have grown 47.56% over the past five years, and it offers a 4.23% annual dividend yield.
2. Digital Realty Trust Inc. (NYSE: DLR)
Digital Realty Trust has increased its dividend for 17 straight years and is one of the largest REITs in the world. In terms of global diversification, Digital Realty offers a strong case. It owns properties in 26 countries on six continents in 50 metro areas around the world. The rental revenue of the REIT grew 80% from 2017 to 2021.
With a market cap of $46.30 billion and annual dividends of 3.42%, Digital Realty Trust offers strong international diversification for global investors.
3. Realty Income (NYSE: O)
Realty Income owns more than 11,000 properties across the United States, United Kingdom, Spain and Puerto Rico. It operates triple net leases, which means the tenants cover maintenance, tax and insurance costs. Realty Income has increased its dividend yields for more than 25 years and pays a 5.77% annual dividend yield.
With a market cap of $47.54 billion and a diversification across global markets, Realty Income can be a stable long-term investment option.
4. iShares Global REIT ETF (NYSEARCA: REET)
iShares Global REIT ETF is an exchange-traded fund (ETF), meaning it is a pooled investment security that holds shares in other REITs or real estate stocks. With a market cap of $3.56 billion, key holdings include Public Storage and Realty Income; Equinix, which specializes in global colocation data centers; and Prologis, which invests in logistics facilities worldwide.
iShares Global REIT ETF has a dividend yield of 2.28% and paid $0.53 per share in the past year, making it a strong growth-potential investment option.
5. Xtrackers International Real Estate ETF (NYSEARCA: HAUZ)
Another ETF option on the list, Xtrackers International Real Estate ETF invests in developed and emerging markets. An ETF REIT can offer better diversification than a single REIT. In terms of regional exposure, the ETF holds 65.73% of assets in Asia, 23.12% in Europe and 8.59% in North America, with small positions in Latin America and Africa. The largest position is in Japan (20.23%).
HAUZ has a dividend yield of 3.4% and paid $0.74 per share in the past year, offering reasonable dividends and strong international market diversification.
6. Vanguard Global ex-US Real Estate ETF (NASDAQ: VNQI)
Vanguard Global is a global real estate ETF that holds real estate stocks in 30 countries with $3.7 billion in net assets. The latest dividend yield was 3.73% or $1.59 per share in annual dividends. An erratic dividend history can leave investors guessing, which, along with weak capital appreciation, makes it a risky choice. But it offers long-term strong international diversification making it a reasonable global REIT ETF choice.
Where to Invest in International REITs
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Why Invest in International REITs
If you're considering international REITs, here are the top reasons why they could be a strong choice.
Diversification
International REITs allow investors to diversify their real estate holdings beyond their domestic market. Investing in properties across different countries and regions can reduce risk and gain exposure to various real estate sectors and economic conditions.
Global Real Estate Exposure
International REITs provide access to a wide range of real estate assets globally, including residential, commercial, industrial, hospitality and specialty properties. This benefit allows investors to participate in the performance of international real estate markets and potentially benefit from different market cycles and trends.
Geographic and Currency Risk
Investing in international REITs involves exposure to different geographic regions and currencies. Factors such as political stability, economic conditions, regulatory frameworks and foreign exchange rates can impact the performance and returns of these REITs. Investors should consider these risks and conduct thorough research before investing.
Access to Expertise
Investment professionals with specialized knowledge and expertise in global real estate markets often manage international REITs. These professionals have the resources and networks to identify attractive investment opportunities and navigate the complexities of investing in foreign markets.
Potential for Improved Returns
Different countries and regions may experience varied real estate cycles and economic conditions, allowing investors to benefit from diversification across markets that may perform differently at different times.
Investing in International REITs
International REITs offer investors diversification opportunities across global markets, from established real estate holdings in Europe or Japan to more speculative growth opportunities in Africa or Latin America. Investors can also consider the best REIT stocks right now, hotel REITs, commercial real estate REITs or alternative investments.
Frequently Asked Questions
What is the largest international REIT?
The largest international REIT by market capitalization is Prologis Inc. (PLD). Prologis is a global leader in logistics real estate, with a focus on industrial properties such as distribution centers and warehouses. The company has a strong presence in key markets around the world, including North America, Europe, and Asia.
Are international REITs a good investment?
International REITs can be a good investment option for investors looking to diversify their real estate portfolio and access opportunities in global markets. By carefully selecting high-quality international REITs with strong track records and solid fundamentals, investors can potentially benefit from the growth potential and income generation of international real estate markets.
What countries are best for REITs?
Some of the best countries for investing in REITs include the US, Canada, Australia and Singapore.
About Alison Plaut
Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.