INDUSTRIAL Real Estate Investment Trusts (Reits) in Asia-Pacific recorded an annualised total returns of 24.7 per cent on the back of unprecedented growth in e-commerce during the past 3 years. Industrial Reits - which have outperformed hotel, retail and office Reits over the last 10 years - are set to continue their growth, according to Cushman & Wakefield’s Asia Reit Market Insight report released on Thursday (Jun 9).

Healthcare Reits recorded an annualised total returns of 22.3 per cent, followed by apartments (19.1 per cent), mixed-use (13.9 per cent) and office (16.1 per cent).

Hotels and retail - investment classes most closely associated with social distancing - recorded 9.4 per cent and 9.8 per cent respectively.

Catherine Chen, director of Asia-Pacific research, said: “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 centres to the centre of investors’ attention.”

Cushman & Wakefield added that 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,” it reported.

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That said, the report highlighted that changes in manufacturing and technology will lead to greater demand for higher-spec assets, such that the best performing Reits will be those that continually improve their properties.

Dennis Yeo, head of investor services and logistics and industrial in Asia-Pacific, said: “Industrial facilities now need to be different from facilities 10 years ago. If logistics operators are using drones and autonomous vehicles for deliveries, facilities need homing devices and charging points. Reits must continue to regenerate their portfolios, either through investing in technology or through disposal and acquisition.”

At the close of 2021 there were 198 Reits in Asia, with a total market value of US$304.1 billion, up by 8.1 per cent year on year. Japan accounted for nearly half of the total value of the Asia Reit market, while Singapore made up the second largest at 28.1 per cent.

Of the 198 Reits, 89 were mixed-use, 30 were focused on the office market, 25 were in industrial or logistics properties, 24 were in retail, 17 in the hotel sector, 7 in healthcare, 4 in multifamily and 2 in data centres.

Last year, 2 new Reits were listed on the Singapore Exchange, namely Daiwa House Logistics Trust : DHLU 0% and Digital Core Reit : DCRU 0%. Altogether, Singapore-listed Reits (S-Reits) had a market value of US$85.31 billion. In 2021, 24 S-Reits also announced acquisitions for a total market value of more than S$15.3 billion.

The highest returns seen in the market was from First Reit : AW9U 0%, which achieved a total return of 56.6 per cent.

Dividend yield for S-Reits was about 6.1 per cent last year, 0.3 percentage point lower than that in 2020.

The average price-to-book (PB) ratio of S-Reits was 1.01 as at initial public offer. As at the end of 2021, the average PB ratio was 1, which means the trading price of Singapore Reits on the secondary market was basically equivalent to book net assets.

Reits in Hong Kong had a PB ratio of 0.54, as border closure brought about by the pandemic “greatly impacted” their trading prices, Cushman & Wakefield noted. Meanwhile, Japan Reits traded at a premium last year, with a PB ratio of 1.14. Cushman & Wakefield added that the ratios of Reits in Asia are generally lower than that in the US, which saw a median PB ratio of 1.7 in 2021.