According to market experts, Asian real estate investment trusts (REITs) are expected to take one or two years to yield back to the pre-global financial crisis market capitalisation peaks.
They expect a robust rebound in REITs in the second half of 2010, particularly from the industrial segment.
Analysts said that the strong take-up rate for office space indicates that there are brighter prospects for industrial REITs in some parts of the region such as Hong Kong, Singapore and Tokyo, where improving yields from office rentals are anticipated to boost REITs.
“We’re quite optimistic that the office sector can gradually recover. REITs that have specialized holdings in the office market can actually start to outperform in the second half of this year,” said Mr. Frankie Lee, regional head of property equities at Henderson Global Investors.
By the end of 2010, Henderson is expecting a 10 percent upside in Singapore office rentals, which will help boost income for industrial REITs. However, the same segment in Thailand and Malaysia is expected to fall behind due to internal politics and weak domestic demand.
Experts said that commercial REITs are less attractive, as they are relatively more expensive or largely at "fair value”.
Currently, Asian REITs are down by around 15 percent from their market capitalization peak before the global financial crisis. A number of observers say these REITs could return to those highs by the end of 2011. More acquisitions are also expected this year.
“They will need to get more and more high quality properties to improve their portfolio so that they can catch the rising market,” said Mr. Liew Choon Wai, partner and Singapore Real Estate Leader at Ernst & Young.
Experts are seeing around three to four large-sized initial public offerings of REITs this year, which is likely to come from India, where business parks are maturing and attracting stable, healthy income streams for real estate owners.