Real Estate

All eyes on real estate in S&P stock launch

Real estate sector now accounts for 3.5% of global equities market

After 17 years of getting tossed into the mix with banks and insurance firms, real estate stocks are getting their own sector to call home on Sept. 1, 2016.

According to an article in The Wall Street Journal by Art Patnaude, real-estate companies have been lumped into a category with banks and insurance firms since 1999, but as of this upcoming Thursday, the sector will break out and form the eleventh group of companies.

Back in May, the people behind the S&P 500 revealed an idea to put a little surge back into the stock market by giving the real estate industry its own sector.

The big reason behind this change? Real estate companies are now a much big player in the stock market.

From the article:

The new classification from MSCI Inc. and S&P Dow Jones Indices LLC, which manage the indexes, is a recognition of the growth of the listed real-estate sector. With a market capitalization of $1.48 trillion, it now accounts for 3.5% of the global equities market, up from a 1.1% share in 2009, according to the European Public Real Estate Association, or EPRA.

The new classification means “there is going to be more money looking at the sector,” said Matthew Norris, executive director for a real-estate fund at London-based property firm Grosvenor Group. “This is going to bring real estate into focus.”

The article explained that the shift won’t be a significant change for specialist investors that only look at real-estate stocks, but it will be a major shift for investors with broader portfolios, known as generalists.

From the article:

“We don’t think things will change dramatically on Sept. 1, or the second, but there will certainly be more people looking at this sector over the long term,” said Philip Charls, EPRA’s chief executive.

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