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Telecommuting is boosting an obscure corner of the real estate industry: Fiber-optic cables. With millions of people working from home and using cloud-based applications to do so, more data is being sent through fiber-optic cables. This is turn is driving demand for greater bandwidth –- a fact that has helped REITs and stocks related to fiber-optic cables outperform the S&P 500, both during this year’s market downturn and on the rebound.

Related ETF: Pacer Benchmark Data & Infrastructure Real Estate Sector EFT (SRVR) ; Related REITs & Stocks: CCI, CIEN, LITE

A cliché often used by property experts is that the three most important factors in determining the desirability of a property are “location, location, location”. While this may be true for real estate companies that lease office space, it is not true for the segment of the real estate industry that leases fiber optic cables. Both benefit from the growth of the “desk job”. But while one thrives in a world where the workplace is centralized, the other thrives in a world where the workforce is becoming decentralized.

A Different Type of Commercial Real Estate Asset

A fiber-optic cable, also known as an optical-fiber cable, is similar in assembly to an electrical cable, except that it contains optical fibers through which pulses of light are sent. The light transmitted forms an electromagnetic carrier wave modulated to carry information. Fiber-optics have become the preferred transmission medium to handle aggressive bandwidth demands, which is why the use of cloud-based applications, audio-video services, and video-on-demand services are strong growth-drivers for the sector. The global fiber optic cable market is expected to expand at a CAGR of +10% between 2020-2026.

While not technically real estate, fiber optic cables, are often owned by property investment firms which then lease them out –- much like office or retail space –- to users, typically telecom companies. Because the Internal Revenue Service (IRS) treats income from such leases as property income, some real-estate investment trusts (REITs) have built up large property portfolios comprised of these cables.

Shift from Corporate Office to Home Office 

One of the characteristics that marked America’s shift from a manufacturing economy to a service-dominated economy was the proliferation of so-called white-collar jobs performed within an administrative setting. That shift fueled the growth of real estate companies dedicated to owning and managing office property…

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