GICS Change Will Boost REITs’ Visibility

The tremendous increase in REITs’ market cap over the past two decades “provides a very strong rationale for having a separate sector,” Eisenberg says.

NEW YORK CITY—The long-awaited reclassification of real estate as a separate category within MSCI’s Global Industry Classification Standard is less than a week away, with Sept. 1 marking the date. The carve-out from the financial category occurs at an especially fortuitous time for REITs, as the sector has performed strongly against the S&P 500 for much of the year. Among other effects, the reclassification will boost REITs’ visibility to investors, Stuart Eisenberg, national leader of BDO USA’s real estate practice, tells GlobeSt.com.

Among those paying more attention could be activist investors, says Eisenberg. “There are activist investors and shareholders who are paying attention to REITs now,” he says. But with REITs becoming a standalone sector, there may be certain investors who will look at more companies or spend more time looking at that piece, whereas they wouldn’t have looked at it when it was part of the financial sector.” It will enable them to scrutinize “the laggards in that category to focus on them,” along with raising the profile of REITs generally.