Viewpoint
2021 C-REITs ViewPoint
August 9, 2021
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- On April 30, 2020, the National Development and Reform Commission (NDRC) and the China Securities Regulatory Commission (CSRC) issued two circulars detailing a long-awaited pilot scheme for the creation of listed Real Estate Investment Trusts (REITs) in China. The first batch of nine public REITs were listed on June 21, 2021, marking the official launch of China’s public REIT market.
- Five of the first batch of nine public REITs are industrial REITs containing underlying assets such as industrial parks and Grade A warehouse facilities that benefit from the development of strategic emerging industries and consumption upgrades. All assets are in the Greater Bay Area, the Yangtze River Delta, and Beijing-Tianjin-Hebei, which have been designated as pilot zones by REIT circulars. The first batch of industrial REITs attracted strong interest from investors and were oversubscribed in their strategic placement, offline sales and online sales stages, raising in excess of RMB 14.7 billion.
- This ViewPoint by CBRE explains how the launch of public REITs will impact China’s real estate market in several ways, including creating short-term downward pressure on cap rates for core industrial assets; generating stronger liquidity for industrial assets in tier 2 and tier 3 cities or for properties with short remaining land usage tenure; enhancing lifecycle asset management for sponsors; and generating new investment opportunities resulting from REIT privatisation.
- The report also explains how the National Development and Reform Commission’s recent issuance of Circular 958, which expands the pilot area of public REITs to the whole country and permits the inclusion of indemnificatory rental apartments as underlying assets, will attract more capital to REITs and further enhance their investment appeal.