After outperforming the broader REIT industry for the last six years, industrial REITs have underperformed thus far in 2021, with total returns of 11.3%. This development could be justification for observers who have long decried the sector's valuation as frothy. But a new report from BTIG notes that pandemic-era shifts in online shopping and consumption will be the new normal post-COVID, suggesting that demand will remain robust in both the near- and long-term. 

So far this year, industrial REIT performance figures trail retail REITs, with malls and shopping centers up 33.6% and 32% respectively, and hotels, which are up 17.5% year-to-date. These sectors are now in recovery mode from the pandemic and their returns are reflecting that.

Industrial has long-term advantages that will continue to propel its growth, BTIG notes. While a record amount of supply has been added over the last few years, BTIG notes that inventory restocking created a "tailwind of demand" so far in 2021.  And while e-commerce's share of retail sales declined from 16.1% in the second quarter of 2020 to 14% in Q4, the gross dollar value of online sales has increased 28% versus traditional retail's 14.7% increase. Add an aging millennial population to the mix—which BTIG says could provide another tailwind to consumption and demand for the sector—and the net result is that industrial fundamentals remain strong.