The omicron variant is already having an impact on the U.S. economy. For the week ended Jan. 15, new unemployment claims rose to 286,000, up from 231,000 the previous week. And while a single jump like that isn't catastrophic, it's an indication something is clearly amiss.
That something is likely omicron-fueled. There's an abundance of jobs to be had right now, so an uptick in unemployment claims is likely the result of many workers needing to isolate or quarantine following COVID-19 exposure.
But the omicron variant's impact isn't limited to jobs. It also has the potential to upset a number of key real estate sectors. Hotels and restaurants, for example, could get hammered in the near term as health concerns keep patrons out of dining establishments and force travelers to cancel their plans. That could, in turn, hurt investors in hospitality REITs.
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Retailers could also see sluggish in-store sales if omicron worries keep customers out of stores. But there's a very interesting flip side to this particular piece of the puzzle.
The fact that omicron is forcing so many Americans to once again hunker down means they're more likely to revert to early pandemic habits. Those include buying apparel, groceries, and just about everything online. And that could benefit industrial REITs in a very big way.
A solid investment
Demand for warehousing space was strong prior to the pandemic, even before a very notable shift to digital sales occurred. But in the past year and change, demand has only picked up.
Nowadays, even more consumers are spending their money online, which has fueled a need for a wider network of distribution and fulfillment centers -- both in general but also in closer proximity to larger cities where square footage tends to come at a premium. If the omicron surge persists, it will only drive the need for industrial space, something real estate investors may want to capitalize on.
Let's also not forget that while some of the supply chain bottlenecks that persisted during the latter part of 2021 have eased, they haven't fully resolved. And now, omicron has the potential to wreak additional havoc in that regard. This only highlights the need for more local fulfillment and distribution centers, especially in light of the truck driver shortage that still very much exists.
Therefore, while the presence of omicron certainly isn't something to celebrate (because, let's face it, we all want to be done with this pandemic already), it could actually end up benefiting industrial REITs in a very big way. Take Prologis, for example, one of the largest players in the industrial space. Its share price is up 55% over the past year alone, and its outlook is overwhelmingly positive. Of course, Prologis is only one option for those looking to dabble in industrial REITs.
The point, however, is that while omicron may have spoiled a lot of holiday plans and may be driving some people out of work temporarily, it also has the potential to boost the value of industrial REITs. And even if the current wave ends up being short-lived as health experts hope, it's still fair to say that investing in industrial space is a good bet in the near term.
