The REIT Market in Asia Pacific Could Reach $500 Billion.

According to the Asia Pacific Real Estate Association, REITs are nonetheless holding their ground in weakening global real estate markets (APREA). Sale

The REIT structure continues to be a core driver of the securitization of real estate holdings in many foreign markets, according to APREA CEO Peter Mitchell, who spoke to the Malaysian National News Agency (BERNAMA).

"Because of their transparent and liquid properties, it has proven extremely resilient in the face of the global financial crisis, particularly in Asia," Mitchell added.

Mitchell stated, "Asia has the lowest level of securitized real estate in the world." "Only around 4% of investment grade real estate in Asia is owned under REIT-type structures, according to estimates." Taking that last point further, assuming a final level of securitization of investment grade real estate of 25%, the market may rise to far over $500 billion in the United States.

"Since the crisis, REITs in the United States, Asia, and Australia have rebounded and performed far better than other real estate asset classes," he told Bernama.

Mitchell noted the global REIT sector has expanded to a total market capitalization of $568 billion US, up $138 billion in the last year alone, according to Ernst & Young data. "Asian has accounted for a large portion of this growth," he said.

According to him, the market capitalization of REITs in Asia was around $2 billion US just before the establishment of the first Japanese REIT (J-REIT). It was around $50 billion five years later.

"There are about 144 Asian-based REITs with a market value of over $127.7 billion US today," he said.

Mitchell told Bernama that on a total return basis In most countries, Asian REITs have consistently outperformed equities, particularly since the global financial crisis, and they have outperformed stocks on a risk and risk-adjusted return basis.

According to Bernama, though the growth has been remarkable, the Asian REIT market is still in its infancy, accounting for only 11.5 percent of all global REITs.

Mitchell told Bernama that big investment banks are optimistic that market capitalization will safely exceed $100 billion in the near future and would continue to rise tremendously.

He cited a number of compelling underlying drivers for this rise, including the fact that a major percentage of Asia's real estate remains in private hands, putting a strain on corporate balance sheets.

"Mitchell believes that this is not a long-term solution. "The REIT format is a far more economical way for firms to keep real estate assets," Mitchell told Bernama. Regardless of when India and China launch their own REIT markets, its significant growth "will have cascading impacts on regional economies."

Other considerations, he said, include additional nations, such as the Philippines, implementing REIT regimes and more investment-grade stock entering the market "in the wake of solid economic growth throughout the region," according to Bernama.