Asia’s Reit market ‘finally recovering’ amid lower interest rates and new listings: Aprea

[SINGAPORE] The real estate investment trust, or Reit, market in Asia is “finally recovering” on the back of lower interest rates, higher investor demand and a surge in new listings.

Speaking to the media on Thursday (Oct 9), Sigrid Zialcita, chief executive officer of the Asia Pacific Real Assets Association (Aprea), said that while regional Reits saw a regression in their performance last year, there has been “positive momentum across the board” this year.

The GPR/Aprea Reit Composite Index, which tracks real estate securities in 12 Asia-Pacific countries and territories, has posted a 15.8 per cent return year to date. In comparison, US Reits have lagged most of the region’s with a modest 4.6 per cent return.

Several markets delivered double-digit returns, including Australia, Japan and Singapore. Hong Kong emerged as the top performer with a 25.4 per cent return year to date.

Apart from lower interest rates, the increase in new Reit listings across the region this year has contributed to the sector’s growth, added Zialcita.

China has been the fastest-growing Reit region with 75 initial public offerings (IPOs) for Reits in the last four years. Year to date, Asia-Pacific Reit IPOs have raised US$7.6 billion, with more than half of capital raised for China-listed or C-Reit listings.

Policy measures across Reit markets have also been supportive of Reit regimes. For example, the Indian authorities approved the reclassification of Reits as equity instruments last month, paving the way for their inclusion into equity indices. “That means that mutual funds can now buy the (Indian) Reits and that could deepen liquidity in the market,” explained Zialcita.

The inclusion of C-Reits into the China-Hong Kong Stock Connect initiative will also greatly expand the investor base and trading liquidity of Reits in both markets, added Zialcita.

Chiming in on China’s Reit market, Aprea chairman John Lim said that although that market is smaller than Singapore’s, “C-Reits will pick up because they are just in a trial period like Singapore 25 years ago”. He added: “But once this asset class has grown, it can be as big as the US’ (market) at US$1 trillion, easily.”

Lim believes that China hospitality Reits, in particular, are “very hot” right now due to the surge in domestic tourism post-pandemic.

With potential for the Reit market in the region to grow, especially in India and China, Lim said that he believes Aprea has a role to play in advocating for Reits as an asset class and providing connectivity between regional markets. He added: “To me, the more the whole region is successful, the more this (Reit) product is successful.”

On Thursday, Aprea also launched the Nature-Based Solutions Playbook for Real Assets in Asia Pacific, a publication that offers practical guidance for the region’s real estate sector to integrate nature-based solutions into their portfolios and projects. Nature-based solutions are actions that involve managing the natural environment to preserve biodiversity benefits.

Zialcita said: “By embracing nature-based solutions, we are not only addressing climate and biodiversity challenges but also creating long-term value for investors and communities.”

Aprea members can download the publication from its website.