The US was the first country to adopt REIT legislation in 1960.

The US REIT market has evolved from 50 companies to over 200 with many non-traditional, unique sectors (which give diversification benefits and the opportunity for active management) such as Healthcare, Datacenters, Towers, and Self-storage.

In 2016 the listed Real Estate (essentially REITs) sector was spun out of Financials and given its own GICS sector classification, indicating growing market acceptance of listed RE as a unique asset class.

As at end 2018, the total market capitalization of REITs globally is c.USD 1.6 trillion (about 2.3% of the global equity market cap). This is up from c.USD 0.26 trillion 15 years ago (about 0.85% of global equity market cap).

Since 2002 US REITs (FTSE NAREIT All Equity REITs) have returned 9.7% total return CAGR vs. the SPX's 6.8% CAGR. It is a similar picture in Asia.

The Growth of REITs in Asia

The sector remains very small relative to potential and will continue to grow.

The Global Financial Crisis caused the total market capitalisation to drop in 2007 and 2008 but the recovery in Asian REITs was quicker than almost all asset classes so that by the end of 2009 the pre-crisis peak had been surpassed.

After a two year pause during the crisis, IPOs started again in 2010. Outperformance of Asian REITs, the increasing acceptance of the REIT asset class and improvements to existing REIT regulations will encourage further IPOs.

New REIT markets are also expected to lead to further growth (for example, India, the Philippines and Thailand have approved legislation while China is in progress).

 Market cap*

REIT Growth 2019

*Japan, Singapore, Hong Kong, Malaysia & Thailand
Source: B&I, Bloomberg, DBS, Nomura.  February 2019