The World’s REIT Markets: Part 1

The global Real Estate Investment Trust (REIT) market is now back onto many investors’ agenda once again, the dominating news being China is now considering launching a new market for REITs, with many predicting this can have a similar level of impact when REIT was first introduced in Japan and Hong Kong which had recorded “REIT-mania” across Asia.

REIT has always been an interest to many investors, especially Asian investors, where they are interested in investing real estate opportunities, but often lack of capital or direct access to commercial properties.

The REIT market worldwide varies considerably according to the region’s portfolio concentration, legislations; investors’ appetite and also investment environment, we have been researching into REIT market for over 5 years globally, here are some thoughts and information that you may find it useful.

USA

Undoubtedly the world’s largest REIT market even though it was adversely impacted during 2008 & 2009 from sub-prime crisis. The US REIT sector is very sophisticated, actually maybe “over-sophisticated” which was the a cause of the sub-prime credit crisis.

In terms of asset diversification, US REIT market is a perfect investment market just about for anyone and everyone. There are REITs dedicated to shopping centers, outlet centers, offices and industrial properties. These are nothing new, but they also have funds investing in childcare centers, telecommunications facilities, satellite farms, hospitals and even cemeteries.

Investors in United States are also quite advanced in the way that they can invest in these funds through markets, or through mutual funds, Fund of Funds or as Exchange Traded Fund, and even index. In the recent years, US investors have also developed a new appetite to invest in international property markets, however, while there are plenty of unlisted property funds in United States, there are only limited number of listed international REITs in United States or ETFs available at this stage, this could be an opportunity to develop in future.

Australia

Many investors have been surprised to see Australia made to the global top 3 rank in terms of the REIT market. This was contributed to 25 years of development of the industry as well as contributed by Australian investors’ appetite in real estate investments.

The 3 main factors contributing to this fact are: Australia has one of the world’s largest pool of superannuation funds (pension funds), Australian superannuation funds are very conservative investors, and have strong appetite in real estate investments and 3^rd lack of investment opportunities available in Australia due to its economy size; and this has “forced” many Australian institutions to invest in real estate opportunities abroad.

The above 3 factors have powered Australian REITs into a major investment source for international projects. The market has no less than 100 listed REITs and another 150 to 200 unlisted property syndicates or funds; Australian property groups also include some of the world’s largest groups such as Westfield Group and Lend Lease; it is definitely an interesting market to consider when comes to real estate investment, at least from the institutions’ perspective.

Canada

Moving back to North America now, Canada is a market not to be missed when comes to real estate investments. There are Canadian REITs both listed in United States or Canada or dual-listed. Canadian REITs and Property Groups have been very active in United States for decades; both in the East & West Coast; and their influences are quite spread including both commercial and non-commercial sectors.

With some similar reasons as Australian REIT market, Canadian investors are active real estate investors for a combination of reasons; a very big and increasing pension industry, also the Canadian National Pension Fund is also one of the world’s most active global investment manager; as well as their risk appetite towards lower risk investments such as properties. Additionally, Canadians have the geographical convenience in investing in American real estate markets as well; this has made Canadian Property Groups and REITs as an ideal segment for investment funds for real estate related projects in North America.

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