Real estate investment trusts can fuel Vietnam realty market as new force: Cushman & Wakefield

Real estate investment trusts (REITs) can help spur the Vietnamese property market’s growth and broaden the array of job specialisms within the asset management profession, says a Cushman & Wakefield executive.

“While the REIT model is a relatively new concept in Vietnam, its value and impact on both investors and developers as well as the broader real estate market can be significant,” Gordon Marsden, head of capital markets, Cushman & Wakefield Asia Pacific, says in a REIT release.

“However, in order to capture all the benefits of REITs, it is important that there be a comprehensive legal and operational framework that is investor-friendly and flexible to best facilitate the growth of the REIT model in Vietnam.”

The global property services firm delivered the release from Singapore Tuesday to explain its latest Asia REIT Market Insight for 2022-2023 report.

In terms of REIT, Vietnam is a young and still traditional market, Marsden adds.

In Asia Pacific and across the world where REITs are in play, these have emboldened greater market transparency, enhanced compliance and opened the way for wider market participation by institutional and retail investors at a lower entry point with better liquidity, he gives more insights from his company’s report.

The combined value of the Asian REIT market was at $263.8 billion at the end of 2022, down 14.7% compared to the end of 2021, according to the study.

The top three largest REIT markets in Asia – Japan, Singapore, and Hong Kong – experienced declines in overall market values in 2022 with a drop of 18%, 14%, and 20%, respectively. In contrast, the mainland China REIT market value surged by 80% on the back of new product offerings.

The report also shows that while REIT products in Asia are still heavily concentrated in Japan, Singapore, and Hong Kong, which together account for more than 80% of the market share, the mainland China REIT market climbed rapidly to rank as the fourth largest in Asia in 2022, up from seventh in 2021.

Catherine Chen, head of capital markets research, Asia Pacific at Cushman & Wakefield, says, “The overall contraction seen in the Asian REIT market in 2022 was largely due to the influence of the U.S. interest rate hikes, coupled with the ongoing effects of the Covid-19 pandemic, which posed challenges for cyclical commercial real estate sectors such as office, retail, and hotel.

She adds, “However, these headwinds are becoming increasingly offset by growing market attention to new economy sectors, including modern logistics facilities and data centers, as well as living sectors, extending from multifamily assets to senior care facilities.”

REITs have also proven popular with both institutional and retail investors in India, according to the study. A total of four REITs listed in the Indian market as of May 2023 comprised of three office REITs and one retail REIT. The three office products have been in existence for more than two years, while the retail product was a new listing in May 2023.

In a related development, CapitaLand Investment, a REIT backed by the Singapore government, announced last weekend it has obtained about S$1.3 billion ($950 million) equity commitment from global institutional investors for three of its private funds.

Therefore, its total equity raised to date this year is S$3.2 billion (over $2.36 billion).

The Singapore-based company added that the amount raised within eight months is a 28% increase compared with the S$2.5 billion (almost $1.85 billion) of equity raised for the full year 2022.