If your portfolio is light on S&P/ASX 200 Index (ASX: XJO) alternative real estate shares, you may wish to run the old slide rule over it.
Traditional real estate shares are comprised of assets including offices, residential property, and retail property.
In contrast, alternative real estate shares are focused on assets including infrastructure, hospitals, schools, industrial facilities and data centres.
So why might you wish to up your exposure to ASX 200 alternative real estate shares?
I’m glad you asked.
Advantage alternative real estate shares
It’s no secret that the global pandemic has ushered in many years’ worth of changes in the investment markets in just a single year.
Chief among those changes has been the increased pace in the growth of digitalisation. With people working, shopping and socialising from their homes, the demand for data – and places to securely store that data – has rocketed.
Going hand in hand with that trend is also the need for more logistics space to accommodate the surge in online purchases. However, the ASX remains quite light on investment opportunities in these sectors.
Hence both ASX data centre shares and ASX logistics shares are among those on Goldman Sachs’ real estate radar.
As reported by the Australian Financial Review, alternative real estate accounts for more than 50% of the listed real estate sector in the United States. In Australia, that figure is closer to 10%.
Adrian Sheldon is Goldman Sachs head of real estate. According to Sheldon:
The Australian listed real estate market is significantly under-represented in alternatives, when you look at alternatives in other markets. So there is massive opportunity in alternative real estate here.
Sheldon adds that alternative real estate “is essential services real estate. What that means is that the underlying demand driver for this type of real estate is very strong, it is not going anywhere and people understand it”.
ASX 200 data centre shares and ASX 200 logistics shares
There is a range of quality shares trading on the ASX involved in data storage and a separate selection in logistics services.
On the larger end of the scale, that number is more limited for investors looking for ASX 200 listed shares.
For the purposes of this article, we’ll look at 1 blue-chip share from each sector.
First up is Centuria Industrial REIT (ASX: CIP). The real estate investment trust is Australia’s largest pure-play industrial REIT. It provides ASX 200 investors with shareholdings in quality logistics assets across Australia’s capital cities.
Over the past 12 months, the CIP share price is up 22%, trailing the 30% gains posted by the ASX 200. At the current price of $3.29 per share, CIP has a market cap of $1.8 billion. The REIT pays a 5.3% dividend yield, unfranked.
Turning to data storage, we have ASX 200 listed Nextdc Ltd (ASX: NXT). Among its assets and services, Nextdc owns 9 data centres across Sydney, Melbourne, Brisbane, Perth and Canberra.
Up 3% in intraday trading today, the NEXTDC share price is up 26% over the past 12 months. So far in 2021, shares have been slipping, down 11% year-to-date. At the current price of $11.05 per share, Nextdc has a market cap of $5.0 billion.
Nextdc’s current share price may represent a bargain. In February Goldman Sachs’s analysts placed a price target of $13.50 per share on the data centre’s stock. That’s 22% above the current share price.