Asia REIT market resilient
Industrial REITs have outperformed hotel, retail and office REITs over the last 10 years, with growth set to continue
Strong long-term drivers underpin a positive outlook for the Industrial sector in Asia despite uncertainty in the near-term macroeconomic climate.
Real Estate Investment Trusts (REITs) in Asia demonstrated relative resilience through the peak COVID-19 period, backed by robust capital structures, sufficient financial liquidity, and supportive regulatory policies. The Cushman & Wakefield 2021-2022 Asia REIT Market Insight report revealed that all classes gained overall momentum to recover strongly during 2021, when the annualized total return rate1 of REITs of each property type turned from negative to positive.
Industrial/logistics REITs, which recorded positive returns throughout, recorded annualized total returns of 24.7 percent in 2021, compared to hotels and retail –– investment classes most closely associated with social distancing –– which recorded 9.4 percent and 9.8 percent respectively. Buoyed by the unprecedented growth in e-commerce during the past three years, industrial/logistics REITs recorded the highest 10-year annualized total returns of any asset class, at 16.4 percent (see table).
Annualized Total Return of REITs by Property Type in the Asia Pacific Market
Source: APREA (based on a selected number of REITs in each market) and compiled in the 2021-2022 Asia REIT Market Insight report.
Catherine Chen, Director, APAC Research said industrial/logistics REITs have seen a wave of capitalization as investors turn to the new economy. “Changes in economic activity have undeniably brought unprecedented challenges to traditional real estate sectors, such as office properties and shopping malls. On the other hand, the surge of activity in the new economy has brought alternative property types such as logistics parks and data centers to the forefront of investors’ attention.”
Solid long-term drivers mean new economy REITs are likely to remain resilient even as the pandemic subsides. Asia’s growing middle class, the largest online retail market in the world and increasing intra-regional trade all point to increased industrial activity. Even near-term uncertainties in the macroeconomic environment could potentially increase demand for logistics assets in the region, as operators accumulate reserves of warehouse space to hedge against supply chain disruption.
Andrew Chan, Managing Director, Head of Valuation & Advisory Services, Greater China, said: “2022 is expected to be another record year for Asia REIT IPOs, especially in China, as local authorities encourage the development of infrastructure-backed REITs as an important financing vehicle for developers.”
As of May 2022, 12 public infrastructure REITs had been successfully listed in mainland China, marking a crucial step for the nation’s REIT market. The opening up of public infrastructure REITs provided equity financing channels for domestic infrastructure holders, with active transactions in the secondary market indicating the market’s recognition of these products. Nonetheless, compared to the most developed global countries and markets, China’s public REITs are still in their infancy. In terms of the current proportion of market value of public REITs in stock capitalization, China is at 0.05%, remarkably lower than Singapore at 13%, the United States at 3%, and Japan at 2%, indicating potential for tremendous future growth in the C-REIT market.
Compared to other major markets in Asia, the Hong Kong REIT market has a less diversified asset base, primarily holding traditional commercial assets such as shopping malls, offices, and hotels. Fewer REITs in Hong Kong focus on new economy assets such as logistics and data centers. In its report titled Revitalizing the Hong Kong SAR REIT Market, the Hong Kong Monetary Authority encourages a range of property categories to go public as REITs on the Hong Kong SAR exchange.
Click here to download the 2021-2022 Asia REIT Market Insight report.
1. For an explanation of annualized total return rate, see report page 17 section 3.3.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms in the world, with approximately 50,000 employees in over 400 offices and 60 countries. In Greater China, a network of 22 offices serves local markets across the region, earning recognition and winning multiple awards for industry-leading performance. In 2021, the firm had revenue of $9.4 billion across core services including valuation, consulting, project & development services, capital markets, project & occupier services, industrial & logistics, retail and others. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.