REITs Center

REITs and Infrastructure Trusts have been gaining traction across Asia-Pacific. Many countries have begun to test waters by releasing their pioneer REITs. Philippines has launched their pioneer REIT in 2020, alongside UAE that released their first Green REIT, whilst China’s highly anticipated REIT pilot program finally came to fruition in June 2021, with the launch of the retail tranches of its first nine REITs all oversubscribed on its first day. China REITs are currently only backed by infrastructure assets packaged in a mutual fund structure, deliberately picked by authorities to spearhead the country’s recovery from the pandemic.

India made its debut for REITs with Blackstone and Embassy-sponsored Embassy Office Parks REIT getting listed on April 1, 2019 as India’s first Real Estate Investment Trust.

Two other REITs, the Raheja Group-backed Mindspace Business Parks REIT and more recently, Brookfield India REIT, have also debuted on the Indian stock exchanges. Together, these three REITs total approximately USD 7.5 billion of market capitalization and cover 86.0 million square feet of Grade-A commercial office space in India. India’s infrastructure investment trust (InvIT) market is growing leaps and bounds and stands at over USD 10billion and is expected to expand to over US$100 billion in the next five years, according to CRISIL Ratings.

The adoption of REITs will continue to accelerate with momentum in 2022 likely to be sustained by the region’s emerging markets. Thailand has already four in waiting. Philippines unveiled its first REIT at the height of the pandemic last year.

This reference guide covers REITs and Infrastructure Trust regulations and taxation in Australia, China, Hong Kong, India, Japan, and Singapore.

Cushman & Wakefield’s 2021-2022 Asia REIT Market Insight report investigates the burgeoning Real Estate Investment Trust market in Asia, examining the primary drivers and state of play in key markets mainland China, Hong Kong SAR, India, Japan and Singapore.

The report reveals that, backed by robust capital structures, sufficient financial liquidity, and supportive regulatory policies, REITs continue to gain overall momentum as the pandemic subsides with logistics/industrial and data centre REITs outperforming more traditional asset classes.

Key highlights:

• Asia market REITs recovered strongly during 2021 after demonstrating notable resilience through the peak of the COVID-19 period, supported by new economy asset classes.
• Industrial and logistics REITs in the Asia market showed the greatest resilience, recording a total return of 24.7 percent, as all other asset classes achieved positive returns.
• Supply chain uncertainties are creating demand as operators accumulate reserves of warehouse space.
• Mature REIT markets can expect to see greater M&A activity through the remainder of 2022 while developing markets can expect to see growth of REITs accelerate.

By Hiroshi Torii
Senior Analyst, Equity Research/REITs
SMBC Nikko Securities Inc.

10 Sep 2021 is the 20th anniversary of the creation of the J-REIT market, which was born on 10 Sep 2001 with the TSE listing of Nippon Building Fund (8951, NBF) and Japan Real Estate (8952, JRE). Amid changing externals, the J-REIT market has passed through periods of stability, frenetic activity, and sluggishness, and has steadily grown in size while working to improve unresolved market issues. Total J-REIT market cap was just Y250bn (acquisition value Y320bn) at end-September 2001, but expanded to Y17.6tn (Y20.9tn) by end-August 2021.

Though the market has good and bad years in terms of performance, income gains (dividends) have built up steadily and the total return (incl dividends) over the 20 years from 10 Sep 2001 to end-August 2021 was +416%, much higher than the +166% for TOPIX. We think the size of J-REIT income gains (incl compound interest) deserves another look.

J-REITs play a crucial role as buyers of domestic real estate. The growth of the J-REIT market has not only revitalized the Japanese real estate market, but has also helped significantly improve market transparency by enhancing disclosure around property transactions and earnings. This has expanded the opportunities for a wide range of investors to access the total returns generated by J-REITs. We look for continued improvement of unresolved issues to unlock further market growth and higher profile.

In this report, we review various aspects of the J-REIT market over the past 20 years. We also look at the 20 biggest events impacting the J-REIT market over the past two decades, and rank the J-REITs based on their performance on several key metrics over the past 20 years. We also highlight issues that the J-REIT market needs to address in the next 10 years.

A collaboration between PwC and APREA, this report aims to provide an overview of the Indian REIT and InvIT market, and how various stakeholders can benefit by investing in these trusts. It also elaborates on regulations governing the structure of these instruments in India and compares REIT markets across major countries in the world.