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1、Knowledge Brief Volume 12Knowledge Brief Volume 12REITs Reconfigured Growth Markets,Prospects,and Alternative SectorsTABLE OF CONTENTS020103Introduction:REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsBy Sigrid ZialcitaGlobal and Regional Trends:Analyzing Overarching Trends Affect

2、ing REITs Both in Developed and Emerging Markets,Including Economic Shifts By Somy ThomasOffice REITs:Go Flex to Stay StrongBy Christine Li04Beyond Core:GrowingInvestment Appetitefor Non-traditionaland Alternative Sectorsin Asia PacificBy Dr Henry Chin&Greg HylandAsia Pacific Real Assets Association

3、 Limited(APREA)does not take responsibility for the content and accuracy of articles on this publication.APREA,its respective directors,employees or affiliates do not make any representation or recommendation whatsoever regarding articles in any of the publications.APREA believes the information in

4、the Knowledge Brief publications to be reliable,but we make absolutely no representation or warranty nor accept any responsibility or liability as to its accuracy,completeness or correctness.Nothing in these publications or website should be taken as a recommendation or to take account of investment

5、 objectives,financial situations or the particular needs of any reader.Any information is no substitute for the exercise of judgment.Reader should obtain their own expert advice on all matters.APREA accepts no liability for damage suffered as a consequence of our published publications,research,poli

6、cies or guidance being used to mislead a third party.Copyright 2024 APREA and individual authors.All rights reserved.060509Alternative Sectors:Opportunities in Nontraditional SectorsBy Govinda SinghAlternative REITs:Subcategories andEconomic Rationale forInclusion in REITsPortfoliosBy Aashiesh Agarw

7、aalReshaping Operations and Strategies with Generative Artificial Intelligence(GenAI)By Catherine He10REITs:Driving Institutionalization in the Commercial Real Estate SectorBy Vimal Nadar07Charging Up the REITswith Renewable EnergyBy Vinamra Srivastava08Asia Pacifics Digital Dynasty is Just Beginnin

8、gBy Jester Perez11REITs and InvITs:Evolution of the Regulatory Landscape in IndiaBy Pratichi Mishra,Dhanush Dinesh and Gunjeet SinghREITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsBy Sigrid ZialcitaIntroduction:The rise of REITs marks a pivotal shift in the investment landscape,wi

9、th these vehicles gaining substantial prominence globally.Traditionally valued for providing investors access to real estate assets,REITs are undergoing a significant reconfiguration to adapt to changing market dynamics.The sector is witnessing a nuanced transformation,focusing not only on tradition

10、al office spaces but also on diversifying into alternative sectors such as healthcare,data centers,logistics,hospitality,and more.This reconfiguration reflects a dynamic response to the demands of modern investors,offering a broader spectrum of investment opportunities,improved flexibility,and resil

11、ience against economic fluctuations.As the real assets industry continues to evolve,REITs are emerging as versatile and adaptive instruments,poised to redefine the investment landscape in the years to come.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sec

12、torsOur latest Knowledge Brief brings together insightful articles covering diverse facets of the real estate investment landscape.We start with Global and Regional Trends:Analyzing Overarching Trends Affecting REITs Both in Developed and Emerging Markets,Including Economic Shifts by Somy Thomas of

13、Cushman&Wakefield,which provides an overview of the landscape.REITs have gained global prominence,with 893 listed REITs and a market capitalization of$1.9 trillion in 2023.US Office REITs face challenges due to remote work trends and rising interest rates,leading to a 31%discount.In contrast,Indias

14、REIT trade at a discount of 11%to NAV with huge potential in growth for operational office stock,favourable government policies,and robust demand thereby offering an opportunistic investment landscape.Office REITs:Go Flex to Stay Strong by Christine Li of Knight Frank delves into the the widespread

15、adoption of hybrid work which has impacted REITs globally.Despite this shift,the offices strategic importance has heightened,with many viewing the office space as a strategic device,emphasizing collaboration,cost mitigation,and talent retention in the Asia Pacific.While the trend towards hybrid work

16、 suggests greater flexibility in corporate real estate strategies,office demand in the Asia-Pacific region remains robust,benefiting office REITs,which can capitalize on the flight-to-quality trend and shorter lease tenures conducive to market dynamics.In Beyond Core:Growing Investment Appetite for

17、Non-traditional and Alternative Sectors in Asia Pacific,Dr Henry Chin&Greg Hyland of CBRE discuss findings from the CBRE 2024 Asia Pacific Investor Intentions Survey,which indicates stable net buying intentions,with high-net worth/private investors driving buying activity,particularly in response to

18、 price corrections and distressed opportunities.They highlight a growing interest in alternative sectors,with healthcare-related properties leading as the most preferred alternative asset class,followed by real estate debt,reflecting investors pursuit of higher risk-return profiles amid the bottom o

19、f the cycle.Alternative Sectors:Opportunities in Non-traditional Sectors by Govinda Singh of Colliers examines the rising trend of private equity funds and institutions allocating more to alternative real estate,seeking higher returns than traditional assets in a higher interest rate environment.Alt

20、ernative assets,categorized into social,living,and infrastructure sectors,present advantages such as diversification,hedging,and higher returns.The Asia Pacific data centre market and the living segment,particularly student accommodation and co-living,are identified as rapidly expanding sectors.APRE

21、A Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAlternative REITs:Sub-categories and Economic Rationale for Inclusion in REITs Portfolios by Aashiesh Agarwaal of ANAROCK Capital Advisors considers how REITs democratize real estate investment,enabling sma

22、ll investors to access diverse portfolios of rental assets.Evolving with demographics and technology,REITs in developed markets offer investors a variety of assets to invest in allowing them to enjoy the benefits of diversification.Meanwhile,REITs are still evolving in economies like India,offering

23、significant potential to evolve in coming years.Charging Up the REITs with Renewable Energy by Vinamra Srivastava of CapitaLand Investments explores how REITs stand poised to capitalize on the renewable energy surge.CapitaLands initiatives,deploying solar panels in Singapore,India,and China,exemplif

24、y how REITs can play a crucial role in reducing carbon emissions and attracting sustainable financing.Asia Pacifics Digital Dynasty is Just Beginning by Jester Perez focuses on the Asia Pacific region becoming a major hub for data centre investment in recent years,recording strong growth in transact

25、ion volumes.SC Capital Partners Head of Research highlights five key investment propositions supporting this growth and why the sector will continue to attract both local and international capital.Reshaping Operations and Strategies with Generative Artificial Intelligence(GenAI)by Catherine He of Co

26、lliers tackles the transformative impact of Generative Artificial Intelligence(GenAI)forREITs and InvITs in revolutionizing their operations and strategies.Recommendations are provided on the strategic adoption,data standardization and enhancement of infrastructure for GenAI,while the associated cha

27、llenges and ethical considerations are also addressed.REITs:Driving Institutionalization in the Commercial Real Estate Sector by Vimal Nadar of Colliers spotlights the Indian commercial real estate sector,with the emergence of REITs presenting attractive investment opportunities.The three listed off

28、ice REITs-Embassy Office Parks,Mindspace Business Parks,and Brookfield India REIT-constitute 12%of the total Grade A office stock in India,offering annualized distribution yields of 6-7%.The evolving regulatory environment,easing entry barriers,and operational resilience contribute to the positive o

29、utlook for REITs,indicating their potential to expand and diversify into various sectors,including retail,data centers,hospitality,healthcare,and education,supported by strategic partnerships and green initiatives.Finally,REITs and InvITs:Evolution of the Regulatory Landscape in India by Pratichi Mi

30、shra,Dhanush Dinesh and Gunjeet Singh presents the significant role played by business trusts in Asian and global capital markets.As the regulatory regime in India approaches the completion of a decade,the article reflects on the evolution of the regulatory landscape for REITs and InvITs.I hope you

31、find these articles insightful in navigating the dynamic landscape of REITs and their evolving role in the real assets industry.Stay informed and stay ahead.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsSigrid is the CEO of APREA.Based in Singapore

32、,she is responsible for overseeing the strategic direction,initiatives and operations of the association across Asia Pacific.Under her leadership,APREA repositioned to an industry trade group focusing on real estate and infrastructure.Prior to APREA,she served as Managing Director of Asia Pacific Re

33、search and Advisory Services of Cushman&Wakefield(C&W)from 2010 through 2018,where she was responsible for research,thought leadership,strategy formulation and client management.A recognized expert in global economic,public policy and real estate issues,Sigrid is a frequent speaker at industry event

34、s.Her commentary on commercial and residential real estate markets is also regularly featured in a wide array of global publications,including the Wall Street Journal,Financial Times,Bloomberg,New York Times and Reuters.Additionally,she has made several television appearances on financial networks a

35、nd radio such as CNBC,Bloomberg,CNN,National Public Radio and Channel News Asia.SIGRIDSIGRID ZIALCITAZIALCITACEOCEOAPREAAPREAAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsGLOBAL AND REGIONAL TRENDS:Analyzing overarching trends affecting REITs both

36、in Analyzing overarching trends affecting REITs both in developed and emerging markets,including economic shifts developed and emerging markets,including economic shifts By Somy ThomasAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAPREA Knowledge Br

37、ief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sectors02004006008001,0001,2001,4001,6001,8002,00019952000200520082012201620202023in US$bnRegionwise MCAP of REITsUSAPACEuropeMarket capitalisation for REITs has increased steadily around the world.In addition to the regions th

38、at have added REITs,Europe and North America have seen growth in existing REITs.The growth in market capitalisation and number of listed REITs reflects the success and durability of the REIT approach to real estate.Introduction and Background of REITsEconomies across the globe have adopted real esta

39、te investment trusts(REITs)as part of their economic development strategies.REITs have become a key part of commercial real estate investment around the world.Presently,there are 893 listed REITs operating around the globe.Since 1990,the equity market capitalisation of listed REITs has grown from ab

40、out$10 billion to$1.9 trillion at the end of 2023.Source:Bloomberg-2.0%-1.5%-1.0%-0.5%0.0%0.5%1.0%1.5%2.0%50.0 70.0 90.0 110.0 130.0 150.0Jan-14Jan-15Jan-16Jan-17Jan-18Jan-19Jan-20Jan-21Jan-22Jan-23Jan-24Historical comparison of REITsS&P OfficeS REITHK REIT US 10 year yield SG 10 year yieldAPREA Kno

41、wledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAs we look ahead into 2024,the high interest rate environment will likely continue to broadly impact all the asset classes including REITs.The consensus is that the Federal Reserve is entering a new,more accommo

42、dative period that increases the prospectsOffice REITs Pre and Post Pandemic Analysis along with overall impact of Interest rates on REITs for stabilising and even declining interest rates in later half of the 2024.As observed in the previous periods of monetary policy adjustments,the end of the rat

43、e-rising cycle could indicate a period of REIT outperformance.Source:S&P 1500 Office REITs Sub-Industry Index,S&P Singapore REIT Index and I APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsWe observe that historically increasing yields in US have led

44、 to increase in interest rates across the globe.The period from 2016 to 2019 had stable macro-economic conditions and a declining trend in the interest rates.This coupled with higher growth rates and lower REIT penetration,led to the outperformance of Singapore and Hong Kong REITs when compared with

45、 US Office REITs.Post pandemic,the culture of work from home is more prevalent in the US as compared to Asia.This has resulted in an uncertain outlook for office space in US.This along with rising interest rates has resulted in muted performance of Office REITs from 2022 onwards.(Please refer the ab

46、ove chart).The median occupancy rate for Office REITs in US has dropped from 93%in 2016 to 86%in Sep23.As per S&P Global,the return to office rate for Asia Pacific region is 70%-100%as compared to 45%-65%for North America.Return to Office trend is one of the leading indicators of robustness of the o

47、ccupancy trends in commercial office space.Accordingly,the average discount to NAV for Office REITs in US as of Dec23 is 31%whereas in Singapore it is around 22%and 11%in India.Of the largest discounts to consensus NAVs,top five are Office REITs in US.Further from 2005 till pre pandemic period Offic

48、e REITs were consistently part of top five sectors based on market capitalisation in US and are now replaced by other sectors like Data centres.RegionMedian Discount to NAV%Occupancy%201620202023201620202023Singapore13.1%15.9%22.6%95.8%95.1%94.8%India*-11.2%10.7%-90.3%88.4%North America11.1%50.0%30.

49、6%93.1%90.0%86.4%Source:Company filings of respective companies,google finance,Commercial Search and S&P Global*Occupancy levels for India are represented by three listed office REITsAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAsia Ex Japan and S

50、ingapore Plethora of Opportunity exists In Asia,Japan and Singapore contribute 74%share of REIT market capitalization.This implies that enormous potential exists for other emerging countries like India where the REIT penetration is much lower.The potential for growth in gross leasable area for APAC

51、region(ex of Japan and Singapore)when compared with developed Europe and US provides an exciting opportunity to invest in fast growing emerging economies.As of March23,US REIT market capitalisation is 99%of listed real estate industry whereas it is 56%in Japan and 66%in Singapore.-20 40 60 80 100 12

52、0 140 160 180 2000204060801001201401602005200620072008200920102011201220132014201520162017201820192020202120222023(No of REITs)No of REITs and MCAPSingaporeHKMalaysiaTaiwanSouth KoreaThailandIndiaPhilippinesMCAP USD BnSource:Bloomberg and Nikko AMThe market capitalisation of REITs in Asia has grown

53、4x from less than USD 25mn in 2008 to USD 100mn in 2021.Singapore has the highest number of REITS i.e.,40 followed by Thailand i.e.,27.Further number of listed REITs in countries like India,Hong Kong,Taiwan and Philippines is at or below 10.This shows that huge opportunity exists for these countries

54、 given the under penetration compared to their Asian counterparts and North America.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sectorsdemand for SEZ space.In Nov23,The Ministry of Commerce and Industry notified the Special Economic Zones(Fourth Amendme

55、nt)Rules,2023 to amend the Special Economic Zones Rules,2006.The said amendment allows denotification of SEZ area thereby allowing wider use of the existing area subject to fulfilment of certain conditions.This would result in further improving the range bound occupancy in the commercial office sect

56、or including the REIs.The total vacant area under SEZ as of Dec23 across top 6 cities was 37.8 msf.The details of vacant SEZ area as of Sep23 for listed REITs is as below:India-In a bright spotPresently,the market cap of three listed office players is$7.86 Bn which is approximately 11%of market capi

57、talisation of Nifty Realty index.The operational office stock under REITs has increased from 24.8 msf in March19 to 82.7 msf as of Dec23.The Grade A stock of REITs as of Dec23 is less than 15%of Grade A office stock in India.This provides a substantial opportunity to expand and grow.The Sunset claus

58、e in 2020 reduced the upfront fiscal benefits for occupiers which also resulted in lesserParticularsUnitEmbassy Office ParkMindspaceBrookfieldCompleted areaMsf35.526.120.8Approx SEZ areaMsf20.114.716.1SEZ as a%of completed area%57%56%77%Vacancy in SEZ area%17%16%20%The demand outlook for office spac

59、es in India remains robust due to the following factor:The combination of a substantial number of Request for Proposals at 20 msf and increased physical occupancy due to the return to office culture.The number of Global Capability Centres in India is expected to increase from 1,580 in 2023 to 2,400

60、by 2030.It is expected that India will witness addition of 115 GCCs on annual basis.The net absorption has shown swift recovery post covid and should meet 2019s quantum in 2024.Based on above factors,it can be concluded that given the robustness of return to office,demand and supply dynamics,governm

61、ent policy focus;there is opportunistic investment potential in the Indian commercial office landscape including REITs.Source:Company FilingsAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsSOMY THOMAS,MRICSSOMY THOMAS,MRICSManaging Director Managing

62、Director Valuation&Advisory,IndiaValuation&Advisory,IndiaCoCo-Head Head Capital Markets,IndiaCapital Markets,IndiaCushman&Wakefield India Private LimitedCushman&Wakefield India Private LimitedSomy leads the India team of Valuations and co-heads the Capital Markets teams at Cushman&Wakefield.He has t

63、wo decades of experience of working with developers/institutions in domestic and international Initial Public Offering and large institutional deals in Indian real estate.He also actively works various corporates on their real estate strategies and helps in the implementation of the same through acq

64、uisitions and divestments.Office REITs:Go Flexto Stay StrongBy Christine LiWidespread adoption of hybrid schedules represents a paradigm shift in the way offices are used.At a time when economies across the world are slowing amid the higher-for-longer environment,REITs backed by offices across the w

65、orld have taken a hit.Although the strength of this new working culture varies across the region,it is evident that office occupiers no longer utilise real their spaces in the same way as they did pre-pandemic.While interest rate pressures will ease into 2024,office landlords will still have to cont

66、end with the structural changes that has permeated the sector.We draw upon Knight Frank Cresas(Y)OUR SPACE 2023 survey for some critical insights that could guide the sectors evolutionary blueprint.Widespread Rationalisation UnlikelyBut first,the good news.While the rise of hybrid work will mean les

67、s time spent in offices,the office will still remain central to corporate culture.In fact,its strategic importance has been heightened.The need for businesses to press ahead with strategic transformation initiatives has,arguably,never been more pressingA consistent message from(Y)OUR SPACE since its

68、 inception in 2018 is that corporate real estate(CRE)is strategically significant,exerting real influence over operational excellence and organisational change.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAPREA Knowledge Brief Volume 12REITs Recon

69、figured:Growth Markets,Prospects,and Alternative Sectors95%of respondents from Knight Franks(Y)OUR SPACE 2023 survey regard real estate as a strategic device,up from 90%in the previous survey carried out two years ago.The survey also further reveals that driving collaboration,cost mitigation,and tal

70、ent retention are the top three drivers of strategic CRE decisions for Asia Pacific respondents.With the stronger return-to-office trend in the region,appetite for quality office space is expected to remain sustained.More than three-quarters of Asia-Pacific-based respondents are expecting their offi

71、ce portfolios to expand or remain the same over the next three years.The tendency to expand footprint,at 30%,remains higher than those expecting to downsize(22%).Rethinking Lease StructuresHowever,the shift to hybrid working styles will compel occupiers to position their Corporate Real Estate(CRE)st

72、rategy to deliver more flexibility in order to optimise their real estate footprint.According to the survey,the inability of landlords to offer flexibility has been indicated by 32%of respondents with an Asia-Pacific remit as the industrys top peeve.Demand for greater flexibility in leasing terms wh

73、ich predates Covid has clearly intensified,with occupiers seeking agility at every turn,even within conventional spaces.As uncertainty continues to brew,occupiers will gravitate towards non-traditional arrangements that support agility.This can encompass structuring leases based on the utilisation o

74、f spaces or which considers changes in a business cycle.However,it is important to note that it is not just about lease tenure.While shorter leases are less risky for occupiers,options to expand and contract space commitments during a lease is the more critical objective.Such arrangements will be mo

75、re crucial as it will also maintain occupancies without compromising WALE,an important metric for REITs.Reasonably,premiums can be attached to such arrangements.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsEmerging Core-Flex ModelThis means Asia-P

76、acific based occupiers will be more willing to expand the proportion of flexible or coworking spaces to become more responsive to changing workplace needs.Knight Franks survey shows this will increasingly be considered by bigger companies.Of those with over 50,000 workers,45%indicate the likelihood

77、of increasing the proportion of flex spaces.However,the sweet spot for most companies in Asia-Pacific is likely to be at most 20%.This points to the growing popularity of core&flex models of occupancy whereby occupiers will fine tune the balance of conventional office spaces within their portfolio.T

78、o sustain tenancies and attract new ones,it will become necessary for landlords to bundle plug-and-play spaces or shared-space options into lease agreements,which will increasingly be valued by occupiers.This can also encompass access to bookable spaces in other locations within the landlords portfo

79、lio or those operated by coworking tenants.Responding to the Future of WorkWhile significant adjustments to office real estate are required,the long-term outlook for the regions office assets continue to be positive relative to short-term headwinds.First off,occupiers will remain keen to build a pre

80、sence in the Asia-Pacific,given the regions long-term structural growth trends.In addition,the stronger return-to-office trend and an office-first hybrid strategy have allowed office demand in Asia-Pacific to hold up better than those in U.and Europe.Occupiers are also seeking premium spaces that ca

81、n facilitate work and collaboration across multiple settings while adhering to sustainability targets.In the endless war for talent,occupiers will also favour well-located and amenitised spaces.This ongoing flight-to-quality trend will continue to benefit the regions office REITs.APREA Knowledge Bri

82、ef Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsLease tenures,typically shorter in the Asia-Pacific at 3-5 years,compared to those in the U.S.and Europe,which can run up to 10 years,also allow REITs to respond more effectively to shifts in leasing conditions whilst ena

83、bling higher conviction for occupiers to execute CRE strategies.These conditions will be conducive in fostering a more active leasing market as well as lower the incidence of backfill and shadow spaces exerting downward pressure on asset values.As such,REITs backed by office assets in the region wil

84、l continue to remain sound.Still,it is evident that asset managers will need to respond to the evolving demand for flexibility in the future of work.Despite the entrenched role that offices play in corporate culture,REITs will require a new dimension in occupier engagement to attract and retain tena

85、ncies.This means putting in place dynamic leasing strategies to cater for a diverse range of occupier objectives.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsCHRISTINE LICHRISTINE LIHead of Research APACHead of Research APACKnight FrankKnight Fran

86、kChristine currently serves as Head of Research APAC at Knight Frank.In this capacity,she plays a pivotal role in shaping the firms long-term business strategy by spearheading research initiatives that align with both regional and global objectives.Christine boasts a remarkable track record of provi

87、ding valuable and actionable research across diverse property sectors.She curates regional forecasts and market outlooks for clients,offering research-driven insights that influence commercial leasing and investment decisions.Christine holds a Master of Arts degree in Media and Communications from t

88、he University of London and a Bachelor of Science degree in Engineering from Cornell University.Beyond Core:Growing Investment Appetitefor Non-traditionaland AlternativeSectors in Asia PacificAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsBy Dr Henr

89、y Chin&Greg HylandAfter rising financing costs dampened sentiment in 2023,commercial real estate investors in Asia Pacific indicated a continued wait-and-see approach in H1 2024 as they seek definitive signs of stability in the recent repricing cycle,before an anticipated increase in capital deploym

90、ent in the second half of the year.CBREs 2024 Asia Pacific Investor Intentions Survey1of over 510 investors in the region showed that investors expect to pivot in the second half of the year when it is expected that the U.S.Federal Reserve and central banks in Asia Pacific will begin cutting rates,c

91、reating a more suitable market environment to support commercial real estate investments.Our report also revealed forward-looking insights from a range of market participants including institutional investors,REITs and developers about their buying intentions,perceived challenges,and preferred strat

92、egies,sectors and markets,including in the alternatives space,for 2024.Buying activity driven by private capitalWhile net buying intentions in the region is expected to remain flat year-on-year,the report indicates that high-net worth/private investors whose buying intentions at+15%is the highest am

93、ong investors surveyed for the second year in a row will continue to drive buying activity this year.These investors are typically more active in taking advantage of downward price adjustments to acquire quality assets when markets are trending down.The main reasons for increasing their allocation i

94、nclude price corrections(23%),more distressed opportunities(17%)and the prospect of normalising interest rates(14%).APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsInstitutional investors,including insurance companies,pension funds and sovereign weal

95、th funds,expect their buying intentions in the first half of 2024 to remain at a similar level,before picking up in the second half when many intend to launch global real estate investment programmes.South Korean domestic investors indicated the strongest intent to buy,with many buyers targeting cor

96、e office assets with strong rental growth prospects.Japanese and Singaporean investors ranked in second and third place,respectively.On the other hand,selling intentions too have hit their highest level since surveys began,with more than 40%of investors surveyed indicating they want to dispose of mo

97、re assets this year to realise returns and repay debt.This sentiment is strongest in Australia,Singapore,and Hong Kong SAR,which has seen a significant drop in capital value for office and industrial assets.In the short-term,developers plan to stay on the sidelines until rates and market corrections

98、 stabilise.With banks cautious to lend,private credit,including bridge and development loans,has filled the gap.These shorter-term financing solutions offered by non-traditional lenders,such as insurance companies and private equity firms,earn them potentially higher returns without having to take o

99、n the additional risk that comes with owning a physical asset.1https:/ Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsValue-added strategies and alternatives gain attentionWith most investors in Asia Pacific targeting double-digit returns amid the bottom

100、of the cycle,investors have broadened their strategies,with some gravitating towards higher risk-return profile investments,such as value-added and distressed assets and debt solutions.Value-added strategies,which involve making physical and/or operational improvements on a property to increase cash

101、 flow and value,is seen as the most preferred investment approach for 2024 in Asia Pacific.That said,core assets in tier one markets remain sought after by institutional investors,although there is a notable pullback in core-plus strategies year-on-year(39%in 2024 vs 46%in 2023).REITs are more focus

102、ed on core(40%)and core-plus(25%)strategies but have demonstrated a greater willingness to pursue value-added strategies(21%from 14%in 2023).From a sectoral perspective,investors still prefer industrial&logistics and office.Institutional investors are increasingly looking at build-to-rent(BTR)/multi

103、family developments over the past 12 months(from 14%to 18%).REITs,on the other hand,are much more diverse in their sector preferences and keen to consider office assets(25%),industrial(23%),retail(19%)and multifamily/BTR(15%)assets.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Pro

104、spects,and Alternative SectorsHealthcare-related properties leads among preferred alternative sectorsInvestors appetite for alternatives increased slightly from last year.Healthcare-related properties,including life sciences and medical offices,was the most preferred alternative asset class for the

105、second consecutive year.Almost half of institutional investors indicated their preference for healthcare-related properties,while REITs are most focused on data centres(33%),life sciences(30%)and real estate debt(30%).An increasing number of investors are also looking to expand into the credit solut

106、ions space as they adapt to a difficult operating environment,making real estate debt the second-most popular alternative asset class this year.Indeed,some of the worlds largest asset managers continue to expand their credit offerings in the region,with increasing opportunities available in Australi

107、a and Korea.Meanwhile,given the slowdown in e-commerce growth and a glut of new supply,investors are turning more cautious in considering cold storage facilities.Similarly,infrastructure and self-storage facilities have seen overall declines,while student accommodation continues to gain in popularit

108、y as an asset class in countries with high levels of migration such as Australia,while witnessing a decline in other markets.The residential sector remains resilient despite prolonged economic uncertainty with ongoing structural change continuing to underpin demand,although the size of the market in

109、 Asia Pacific remains relatively small.However,the sector is set to attract more capital in 2024,particularly in the build-to-rent and build-to-sell categories with retirement living facilities in markets with ageing populations,such as Japan and Korea,seeing strong interest.APREA Knowledge Brief Vo

110、lume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsJapan remains top market for cross-border investmentCheaper financing and stable income streams made Japan the most preferred country for cross-border real estate investment for a fifth consecutive year,with Tokyo,Osaka and re

111、gional cities remaining popular choices for investors.Singapore and Australia took second and third place,respectively.Singapore saw a sharp increase in investors interested in value-added strategies after core and core-plus strategies delivered returns below historical levels.In Australia,investors

112、 continue to largely focus on the Sydney market while becoming more selective when considering other regional cities.India climbed to the top of the list of emerging market destinations in this years survey.The countrys largest cities,Mumbai and New Delhi,remain on the radar of long-term investors l

113、ooking to increase their real estate exposure in the worlds fastest-growing economy.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsDr Henry Chin is the Global Head of Investor Thought Leadership and Asia Pacific Head of Research at CBRE.Henry leads

114、a global research team to identify the key forces influencing commercial real estate investors across all sectors and collaborates closely with CBRE clients to help them understand the intricacies of property markets and make strategic investment decisions.HENRYHENRY CHINCHINGlobalGlobal HeadHead of

115、of InvestorInvestor ThoughtThought Leadership,Leadership,HeadHead ofof Research,Research,AsiaAsia PacificPacificCBRECBREGreg Hyland is the Head of Capital Markets,Asia Pacific for CBRE.Based in Singapore,he is responsible for all of CBREs Capital Markets teams across the region.With over 20 years of

116、 experience,Greg has positioned himself as one Asia Pacifics leading Capital Markets professionals and established deep relationships with some of the worlds leading real estate investors.GREGGREG HYLANDHYLANDHeadHead ofof CapitalCapital Markets,Markets,AsiaAsia PacificPacificCBRECBRERecent years ha

117、ve led to an upheaval in social norms and the way we live,work and interact.This has been exacerbated with the rapid adoption and use of technology,which is set to be even more engrained in our daily lives with AI.Further,especially in a higher interest rate environment,and amid slower repricing,tra

118、ditional real estate investment yields have reduced making them less attractive for those seeking higher returns.As such,there is increasing allocation to alternative real estate from private equity funds and institutions.Alternative assets present an ability to maintain and grow earnings against th

119、e backdrop of high inflation and a slowing economy,often offering better long-term potential.They can be broadly classified intoAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sectorsthree groups:social(education,medical centres,private hospitals,service st

120、ations etc);living(co-living,build-to-rent,student accommodation,retirement facilities);and infrastructure(data centres,life sciences,self-storage,renewables).Alternative real estate offers a number of advantages notwithstanding diversification,hedging and higher returns.On the latter,by way of comp

121、arison,traditional real estate asset classes(office,retail,residential)often offer sub 5%yields,which can be easily lower in more mature markets.Alternative real estate by contrast often offers 6%plus even in mature markets.There are,however,some disadvantages,especially in knowledge gap,liquidity,a

122、nd operations,which can be overcome by seeking specialist advice and use of operators.AlternativeSectors:Opportunities inNon-traditional SectorsBy Govinda SinghAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsIndustry data on alternative investment sa

123、les volume can be difficult to obtain given that different participants may include certain segments into traditional/core e.g.hotels(as an asset class in its own right)and data centres(industrial),whilst other may still view them as alternatives.According to data from MSCI Real Assets,investment in

124、 alternative real estate accounted for circa 12%of total commercial transaction volume in 2023.Of the US$708bn transacted in 2023 across Asia-Pacific,this would therefore represent circa US$85bn allocated to alternative real estate.Our view is the share of investment in alternatives could increase t

125、o as much as 17%of transaction volumes in the near term as an increasing amount of capital is deployed in the sector.According to a report by the Urban Land Institute,public real estate investment trusts(REITs)have led the charge into non-traditional sectors and helped bring alternatives into the ma

126、instream of commercial real estate investing.Examples are Keppel DC REIT,CapitaLand China Trust and Mapletree Industrial Trust,who are all increasing their allocations to alternatives especially data centres.We are also seeing more institutional funds allocating capital to alternatives with Hines an

127、d PGIM actively investing in the co-living sector for example.The buyer pool is therefore rapidly expanding.One of the fastest growing sectors is data centres as changes in behavioural patterns post COVID and the charge towards digitalisation progresses.According to a report by Mordor Intelligence,t

128、he Asia-Pacific data centre market is estimated at 14.27 thousand MW in 2024,with this set to increase to 23.20 thousand MW by 2029,growing by a compound annual growth rate(CAGR)of 10.1%over the period.According to Statistica,this translated into US$116.7bn,of revenue in 2023,with this set to grow b

129、y a CAGR of 7.2%,resulting in total revenues of US$160.7 by 2028.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsIt is evident throughout all countries that demand has been led by the move to cloud service infrastructure especially as technology comp

130、anies moved their products online and governments pushed towards digitisation.Further,demand for media content led by social media and high internet penetration rates together with more services being offered online(e commerce and streaming)will underpin future growth especially for hyperscale and c

131、olocation service providers.Another rapidly expanding sector is the living segment.It is evident that more and more REITS and institutions are deploying more capital into the living segment(excluding multifamily).Student accommodation,with its stability and ability to quickly adjust rents to market,

132、and co-living,a segment that fills the gap between traditional build-to-rent and service apartments,are two of the fastest growing sectors.According to a report by Mordor88.995.4106.1105.3105.7113.1110.8116.7121.6160.70.020.040.060.080.0100.0120.0140.0160.0180.0201620172018201920202021202220232024F2

133、028FUS$bnData Centre Revenue Asia(US$bn)Intelligence,the Asia-Pacific student accommodation market was worth US$3.7billion in 2023,with this poised to increase by a CAGR of 5.1%by the end of 2029.Co-living still remains well in its infancy across the region,although with changing demographics,increa

134、sing home ownership costs and consumer behaviours,the sector is poised for continued growth.Its attractive margins,compared to say residential,makes it investable.What many investors may not have realised is that there is an array of alternative real estate assets that has been rapidly growing,lever

135、aging on structural demand.It is witnessing growing investment,led by REITS and increasingly institutional investors.For real estate investors who are keen to venture into non-traditional assets,these offer investment opportunities,which could potentially deliver respectable returns that are not nec

136、essarily correlated with traditional real estate assets.Source:StatisticaAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsGOVINDA SINGHGOVINDA SINGHExecutive Director|Asia Hotels&Leisure,Executive Director|Asia Hotels&Leisure,Real Estate AdvisoryReal

137、Estate AdvisoryColliers Colliers Govinda has extensive experience in real estate consulting and valuation,which includes 17 years of specialist experience in the urban regeneration,mixed-use,concept place-making,gaming,tourism,and hospitality and leisure sectors in particular.He is also one of Colli

138、ers dedicated specialist portfolio advisors and valuers in the region,and globally.His clients include operators,developers,sovereign wealth funds,private equity,REITS,banks,high net worth individuals,governments and institutional investors.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Ma

139、rkets,Prospects,and Alternative SectorsAlternative REITs:Sub-categories and Economic Rationale for Inclusion in REITs PortfoliosBy Aashiesh AgarwaalREITs allows small investors to invest in a pool of large assets allowing them to benefit from a portfolio of rental assets,which was earlier inaccessib

140、le to them.The key regulatory innovation herein was the pass-through taxation which made the income earned on these assets taxable in the hands of the investor.Over the six decades since the first REIT issuance by American Realty Trust in 1961,a large variety of REITs have been floated,leveraging on

141、 the efficient tax structure aimed at investors seeking exposure to steady income producing assets.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsDemographic changes,technology and financial innovation have been the key drivers of the spawn of alter

142、native assets created within the REIT framework.Most importantly,from an investors perspective,different assets have differing cash flow drivers and risk factors,lending these investments a strong USP of diversification.Needless to say,US markets remains at the forefront of financial innovation,and

143、markets like India continue to lag in terms of variety of alternative assets.For instance,India has seen its first retail REITs only in recent quarters,in the backdrop of only a handful of commercial REITs and InvITs listed.Within this backdrop,we discuss the various key alternative assets:Student h

144、ousing:Purpose-built student accommodation(PBSA)refers to specialized accommodation designed exclusively for students,typically located near educational institutions.These facilities prioritize student-centric amenities and features,including furnished living spaces,communal areas for socializing an

145、d studying,and various support services.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsPBSA addresses the evolving expectations of modern students by providing a convenient and conducive living environment.These residences often incorporate advanced

146、 technologies,security measures,and sustainable practices.Additionally,developers and investors recognize the potential for consistent demand,offering a stable and profitable investment opportunity.The competitive nature of the higher education landscape also drives the growth of PBSA.Institutions s

147、trive to attract students by providing a comprehensive educational experience,including quality accommodation.This has led to partnerships between universities and private developers to meet the rising demand for purpose-built student housing.The growth of purpose-built student housing can be attrib

148、uted to several factors.Firstly,the increasing global enrolment in higher education has created a higher demand for student accommodation.As more students pursue tertiary education,traditional housing options may struggle to meet their specific needs.Data Centres:Data centers are centralized facilit

149、ies equipped with computing hardware,storage systems,networking infrastructure,and other components to efficiently manage,process,store,and disseminate large volumes of data.They serve as the backbone of modern information technology,supporting various online services,applications,and digital operat

150、ions for businesses,organizations,and cloud service providers.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sectorscomputational power and storage capabilities to meet these demands.Moreover,the ongoing digital transformation across industries,reliance on

151、 remote work,and the surge in internet-connected devices contribute to the expansion of data centerinfrastructure.As businesses recognize the strategic importance of data in decision-making and innovation,the demand for scalable and reliable data center facilities continues to grow.The evolution of

152、technology and the need for resilient,high-performance computing environments further fuel the expansion of data centers to support the increasingly data-centric nature of contemporary society.However,given the energy intensity and cooling requirements of the industry,there is an increasing pressure

153、 from customers,investors,and regulators to increase energy efficiency and reduce environmental impact.The growth of data centers can be attributed to the escalating demand for digital services and the exponential increase in data generated globally.With the proliferation of cloud computing,big data

154、 analytics,artificial intelligence,and other data-intensive technologies,organizations require robust and scalable infrastructure to handle massive amounts of information securely and efficiently.Data centers provide the necessary Warehousing:Investments in warehousing assets are experiencing a sign

155、ificant surge driven by several key factors.The e-commerce boom,accelerated by changes in consumer behavior and increased online shopping,has created a robust demand for efficient and strategically located warehouses.As more businesses adopt omnichannel distribution models,the need for well-organize

156、d storage and distribution centers has intensified.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAdditionally,the globalization of supply chains has led to an increased focus on logistics and inventory management.Warehousing plays a crucial role in

157、 facilitating the timely movement of goods across borders and meeting the expectations of fast-paced delivery schedules.The rise of technology,such as automation and robotics,has transformed warehouse operations,making them more efficient and cost-effective.Investors recognize the potential for high

158、 returns in modernizing and optimizing warehousing facilities to keep up with technological advancements.The ongoing COVID-19 pandemic has further accelerated the trend,emphasizing the importance of resilient supply chains and the need for additional warehousing space to handle unexpected disruption

159、s.With the growing emphasis on inventory resilience and supply chain agility,investments in warehousing assets continue to attract attention as a critical component of the evolving logistics landscape.Overall,the combination of e-commerce growth,supply chain complexities,technological advancements,a

160、nd pandemic-driven considerations fuels the increasing investments in warehousing assets.Well planned and well managed modern warehouses provides shared facilities that improves the overall employee convenience and benefit,thus helping tenants attract and retain employees.Further,larger warehouses o

161、wned and managed by single landlords are better positioned to be ESG compliant compared to unorganised warehouses or those held by multiple landlords.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsThe rise of technology,such as automation and roboti

162、cs,has transformed warehouse operations,making them more efficient and cost-effective.Some of the other alternative REIT assets which are also seeing healthy interest globally areCold chains:Cold chains are expected to continue its growth driven by increasing demand for temperature-controlled storag

163、e and transportation across industries like food,pharmaceuticals,and chemicals.Globalised trade and supply chains has necessitated the need for supporting cold chain infrastructure,such that temperature-sensitive products are maintained at the required temperature during the transportation and stora

164、ge.Advent of IoT/5G technology is also helping improve the reliability of the cold chain by allowing real time monitoring of temperature and humidity.Increased reliability is likely to support the industry growth as the risk of spoilage and waste gets reduced.Like data centres,cold chains also have

165、environmental and climate change implications from the energy intensity to leakage of refrigerant gases.However,it has been argued that reduction in methane emissions and reduced food wastage more than offset the greenhouse emissions of the cold chain.Self-Storage spaces:Self-storage properties are

166、small warehouses with multiple units that range in size.Owners lease storage units in these buildings to businesses and individuals that need space to store inventory or household items.The demand drivers for this sector are relocation,decluttering,increased house prices/rent,changing life circumsta

167、nces and business purposes.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsGiven the retail nature of consumers and relatively shorter duration of the customer requirement,compared to say,an office,data centre or warehouse,the rents tend to reprice t

168、hemselves quicker to prevalent market trends as compared to offices or warehouses.Healthcare:According to NAREIT,health care REITs own and manage a variety of health care-related real estate and collect rent from tenants.Health care REITs property types include senior living facilities,hospitals,med

169、ical office buildings and skilled nursing facilities.Healthcare REITs may further include outpatient facilities,medical offices and life science innovation and research properties,among others.One of the key demand drivers of these assets is the aging of the baby boomer generation.A basic regression

170、 of 10 key office REITs,retail REITs and of 12 alternative asset REITs on S&P 500(results in chart:Alternative REIT Assets have lower systematic risk compared to mainstream REITs)substantiates the diversification benefits that alternative assets can provide to a portfolio of REITs.Chart:Alternative

171、REIT Assets have lower systematic risk compared to mainstream REITsAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsDivergent drivers provide excellent source of diversification while providing inflation hedged steady cash flow prospectsREITs,by its i

172、nherent nature,provides stable cash flows to its investors.Furthermore,they provide excellent inflation protection over long term.However,as an investor,you are still exposed to risk in volatility of market prices.Alternative assets,as already discussed,have their cash flows underpinned by economic

173、drivers varying as compared to the mainstream assets like offices and retail assets.This causal relationship is also well expressed in the measure of beta for alternative assets,office assets and retail assets using the capital asset pricing model.APREA Knowledge Brief Volume 12REITs Reconfigured:Gr

174、owth Markets,Prospects,and Alternative SectorsAASHIESH AGARWAALAASHIESH AGARWAALSenior Vice President Senior Vice President Research and Investment Research and Investment AdvisoryAdvisoryANAROCK Capital Advisors Private LimitedANAROCK Capital Advisors Private LimitedAashiesh Agarwaal is working wit

175、h Anarock Capital Advisors Private Limited covering Capital Markets Research and also advises clients on acquisition and disposition of assets and capital in the India real estate space.You can read Aashieshs report on PE activity in Indian real estate on https:/bit.ly/3SpDx1dand his work on impact

176、of Insolvency and Bankruptcy Code on real estate on https:/bit.ly/3CBqiBwand http:/bit.ly/47cUvnC.Aashiesh also has a rich experience in Indian equities as a portfolio manager and lead analyst with leading securities firms.Outside work,Aashiesh has a very active interest in Pranic Healing(a form of

177、energy healing),meditation and spirituality.As part of giving back to society,Aashiesh also engages with Wellness Workplace an initiative to promote employee mental health and well-being.Charging Up the REITs with Renewable EnergyAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prosp

178、ects,and Alternative SectorsBy Vinamra SrivastavaCOP28 saw close to 200 countries agree to transition away from fossil fuels and a tripling of renewable energy capacity by 2030.In the area of solar energy alone,Bain&Company forecasts a US$20 billion opportunity by 2030,where Southeast Asia is one of

179、 the fastest growing markets.At the same time,real estate investment trusts(REITs)hold one of the largest and most extensive portfolios of physical buildings.How can REIT owners and their investors take advantage of this rising demand for renewable energy and the untapped potential of REITs to creat

180、e further sustainable value?Based on an article by RMI,key advantages of REITs over other solar developments include the presence of existing infrastructure(e.g.rooftops),optimal generation conditions(e.g.large flat roofs free of tree cover),building electrification to lower operating costs,ability

181、to offset EV charging for tenant-owned and personal vehicles,and faster implementation which reduces interconnection issues.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsCLINTs captive solar plant in Tamil Nadu,India will generate the power supply

182、needs of 2 million sq ft equivalent of office space.As an early mover,CapitaLand announced a partnership with Sembcorp back in 2019 where approximately 21,240 solar panels were installed on six of its buildings under CapitaLand Ascendas REIT(CLAR),forming the largest combined rooftop solar facility

183、in Singapore by a real estate company at that time and generating around 10,292 megawatt hours(MWh)of energy annually.As of 1 February 2024,there are 22 properties with solar panel installations within the assets of CLAR in Singapore,generating enough renewable energy to power more than 5,000 4-room

184、 HDB flats annually.This is one of the largest combined rooftop installations in Singapore amongst the S-REITs.More recently in January 2024,CapitaLand India Trust(CLINT)commissioned its first 21 megawatt captive solar plant in Tamil Nadu,India.The plant will supply over 30,000 MWh of electricity an

185、nually,equivalent to powering 2 million square feet of office space1,and increase CLINTs green energy usage by over 70%.Commissioning this power plant also reduces CLINTs need to purchase power externally,and reduces its exposure to price volatility from external sources.Greening CLINTs energy use a

186、ligns with the 2030 CapitaLand Investment Sustainability Master Plan goal of achieving 45%of electricity consumption from renewable sources and CLIs net zero commitment for Scope 1 and 2.Having said that,the renewable energy market is not all that easy to penetrate.Some considerations include the hi

187、gh upfront capital required,regulation of the energy market and grid readiness,and implementation feasibility.Given the varying asset types within CapitaLand Investments large REIT portfolio,not all assets rooftops are suitable due to various reasons such as load and space constraints.1Based on assu

188、mption of an office space in India,with an average electricity usage of 15 kWh/sq ft/year.Innovation is thus a key lever to maximise usable space for solar power generation.CapitaLand China Trust(CLCT)is in the process of trialing Sunman Solar Panels,a glass-free,lightweight and flexible solar panel

189、,a solution sourced from the CapitaLand Sustainability X Challenge,to see if it can provide comparable performance to standard glass solar panel with 70%reduced weight of panel.If the trial is successful,this technology will unlock the potential of many more assets to generate solar power.CLCT curre

190、ntly has 253 solar panels installed on the roof of Kunshan Bacheng Logistics Park that can collectively generate 92 MWh of energy annually.Pushing the renewable energy agenda does require significant capital investments to build up the infrastructure,but it also opens doors to additional funding opp

191、ortunities through sustainable finance,which incorporates environmental,social,and governance considerations.Interest rate savings obtained can also be channelled back to support decarbonisation efforts.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sector

192、sThe real estate industry contributes to 42%of global carbon dioxide emissions.Transitioning to renewable energy is a critical lever to achieve deep greenhouse gas emission reductions,especially for real estate operational emissions.With many jurisdictions in APAC making this a technically and comme

193、rcially feasible proposition,we can expect more investments to pour into the sector from various REITs across the region.Workers installing the Sunman Solar Panels,a glass-free,lightweight&flexible solar panel on the roof of a CapitaLand property in China.As of 1 February 2024,there are 22 propertie

194、s with solar panel installations within the assets of CLAR in Singapore,generating enough renewable energy to power more than 5,000 4-room HDB flats annually.This is one of the largest combined rooftop installations in Singapore amongst the S-REITs.VinamraVinamra SrivastavaSrivastavaChief Sustainabi

195、lity&Sustainable Investments OfficerChief Sustainability&Sustainable Investments OfficerCapitaLand InvestmentCapitaLand InvestmentVinamra is CapitaLand Investments(CLI)Chief Sustainability&Sustainable Investments Officer.He formulates and integrates the Groups ESG strategy,policies and best practice

196、s into its business,operations,and culture,delivering long-term economic value to stakeholders.He also leads CLIs sustainable real assets investments including renewable energy and climate-tech venture capital.Vinamra was previously CEO,India Business Parks,CLI,developing and growing business parks

197、and sustainability projects across India.Before that,he headed Ascendas-Singbridges Corporate Strategy&Development function.Before joining CapitaLand in 2015,Vinamra was a management consultant at Roland Berger Strategy Consultants,Cisco Systems and Arthur D.Little.APREA Knowledge Brief Volume 12REI

198、Ts Reconfigured:Growth Markets,Prospects,and Alternative SectorsAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAsia PacificsDigital Dynastyis Just BeginningOver the last decade the Asia Pacific region(APAC)has emerged as a hotbed for data centre inv

199、estment,attracting both local and international players.With the exponential growth of data-driven technologies and the increasing demand for cloud services,the region has become a strategic hub for investors looking to capitalise on the digital revolution.There are five key propositions supporting

200、the strong case for data centre investment in APAC,highlighting the immense potential that lie ahead.By Jester PerezAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsThe increasing adoption of cloud services by SMEs will be a key driver of demand for d

201、ata centres.Cloud platforms offer agility,scalability,and cost-effectiveness.It also provides greater flexibility and capability in how firms manage applications,services,and data.Cloud technology is rapidly becoming the main platform for enterprise IT,particularly after the COVID-19 pandemic.Howeve

202、r,SMEs,which account for a significant proportion of firms 90%of all firms globally according to the World Bank(around 96%in Asia)still lag in cloud adoption.According to a survey conducted by DBS Bank,only 41%of SMEs in APAC are using digital solutions compared to 71%of larger corporations.But whil

203、e digital migration is comparatively low,a growing number of SMEs in APAC are adopting digital platforms.The survey conducted by DBS also found that in addition to the 41%of SMEs that are already using digital platforms,a further 23%is about to embark or implement a digital strategy.To support the m

204、igration to digital platforms and the growth in enterprise demand for cloud services,additional data processing and data storage capacity will be needed in the region.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsGovernments are also embarking on t

205、he digital transformation journey.Cloud adoption within the public sector accelerated in recent years,with COVID-19 being the main impetus.Cloud-based solutions have enabled government agencies to quickly deploy and scale applications,allowing them to better serve citizens,respond to emergencies,and

206、 collaborate with other agencies.But this wasnt always the trend.In 2019,Boston Consulting Group analysed cloud adoption between various industries and found the public sector lagged behind other industry groups4.The onset of the pandemic highlighted the importance of digital transformation,particul

207、arly in the APAC region.Cloud-based platforms have become key enablers for governments looking to modernise their operations.However,while migration to digital platforms among government agencies has increased,they still trail behind other industries.As a result,government agencies in APAC are expec

208、ted to continue migrating to the cloud at an accelerated pace in the coming years.This digitalisation trend among public sector agencies,as well as new data sovereignty rules,will add to the increasing demand for data processing and data storage facilities,further highlighting that data centres will

209、 be a key component in the regions digital transformation journey.Significant untapped demand from enterprisesResilient long-term demand from the public sector12The APAC region is forecast to see solid growth in the application of Machine Learning(ML),Artificial Intelligence(AI)technologies and the

210、Internet of Things(IoT).This will be driven by several factors including the growing need to improve efficiency and increase productivity.Automation is already being used to tackle complex problems across a wide range of industries,leading to a reduction in cost and improvement in revenue.Sustainabi

211、lity is another key area where companies are implementing new technologies to drive desired outcomes.According to an IBM survey,around 66%of companies are now using,or planning to use,AI to address sustainability goals5.These technologies present significant opportunities and potential for businesse

212、s and governments in APAC and substantial investment is expected over the medium term.A report by IDC estimates that spending on AI systems in APAC will increase by 22.6%(CAGR)between 2022 and 20266,highlighting the growing demand for these data intensive technologies which process significant amoun

213、ts of information.Given these technologies are already being used across a wide range of industries in APAC,there is immediate requirement for fast,reliable and secure data centre facilities to support these technologies.As the application of these technologies become more broad-based,they will furt

214、her drive demand for data centre capacity.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsThe adoption of cloud computing continues to grow,even in the face of weaker economic conditions.By leveraging cloud services,companies can reduce their infrast

215、ructure and operational costs,while benefiting from faster product deployment times,increased flexibility of services and better engagement from customers and business partners.The digital transformation among governments and enterprises points to strong demand for cloud services,particularly those

216、offered by hyperscale providers with their advanced technology offerings,and extensive cloud ecosystems.Evidently,hyperscalersare expected to record strong revenue growth of 33.3%(CAGR)7over the medium term as more organisations and government agencies migrate to digital platforms.Given the expected

217、 growth in cloud adoption,hyperscale cloud providers-such as Amazon Web Services,Google Cloud and IBM Cloud-will continue to expand across the APAC region and will drive leasing demand for data centres.New technology driving immediate demandDigital cloud providers are expanding rapidly34As a share o

218、f its population,internet penetration in APAC lags other regions according to figures from the World Bank8.Similarly,APAC trails behind more developed regions in terms of fixed broadband subscriptions,highlighting how digitally underserved the APAC region is.It also largely reflects the challenges o

219、f servicing a diverse and vast region(both in geographical and population size)and the inadequacy of existing infrastructure.While some markets in APAC are more developed than others,the region broadly trails Europe and North America.But while APAC lags other regions,it also represents significant p

220、otential for opportunity and growth.According to a report published by Ericsson,5G connection will become the predominant mobile connection by 20289,surpassing other mobile subscriptions,and APAC will account for over 60%of all 5G mobile subscriptions globally8.This growth in mobile subscription and

221、 data traffic points to sizeable data centre demand over the coming years and underscores the regions growth potential.Large,underserved region5APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sectors1.World Bank SME Finance2.Asia Development Bank Asia Small

222、 and Medium Sized Enterprise Monitor,October 20233.DBS Bank 2021 Digital Readiness Survey4.Boston Consulting Group Ascent To The Cloud5.IBM Global AI Adoption Index 20226.IDC Company press release“AI Spending Will Rise Over$46 billion by 2026 in Asia Pacific”,26 September 20227.Cushman&Wakefield Glo

223、bal Data Centre Market Comparison 20238.World Bank Databank 9.Ericsson Mobility Report 2023Sources:APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsJESTER PEREZJESTER PEREZResearch DirectorResearch DirectorSC Capital Partners(SCCP)SC Capital Partners(

224、SCCP)Mr.Perez joined the firm in 2022 and has over 18 years experience in commercial real estate.Prior to SCCP,Mr.Perez also worked at Lendlease(Sydney and Singapore)and Jones Lang LaSalle(Sydney)in their Research functions,where he was responsible for publishing industry-leading research on real es

225、tate markets.Reshaping Operations and Strategies with Generative Artificial Intelligence(GenAI)APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsBy Catherine HeIn the ever-evolving landscape of real estate technology(proptech),innovations such as Virtu

226、al Reality/Augmented Reality(VR/AR),Blockchain,the Internet of Things(IoT),and mobile applications have enhanced the operations and strategies of REITs and InvITs.However,Generative Artificial Intelligence(GenAI)in particular,has captured considerable attention for its transformative potential.This

227、article explores the broader implications of GenAI on the real estate sector and outlines actionable steps for market players to harness the opportunities presented by this emerging technology.Most importantly,GenAI has democratized access by enabling a plug-in environment;allowing the integration o

228、f external data and adaptation to diverse contexts with minimal coding.This will greatly reduce the time and cost required to adopt GenAI models,enabling industry players to explore new use cases rapidly.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Secto

229、rsGen AI could transform operationsOne of the key areas where GenAI can make a significant impact is in the design and optimization of space functions.By leveraging AI to predict the demand and needs of commercial spaces,real estate professionals can gain insights into productivity,employee/tenant r

230、etention,and space planning.GenAI opens the door to creating plans that not only optimize space but also aligns with the preferred style and requirements of its occupiers.In terms of business transformation,GenAI offers unparalleled opportunities to streamline Customer Relationship Management(CRM),p

231、roperty management,and legal processes.Inefficient systems can be overhauled,reducing resources and time spent on tasks such as summarizing lease agreements and handling complex tenant requirements.Gen AI can even help in the negotiation of leases based on tenant characteristics.Industrial assets ca

232、n also undergo a significant transformation through the predictive capabilities of GenAI.From predicting product demand to optimizing logistics,GenAI can drive productivity improvements in critical areas such as lease writing,valuation,and legal processes.This not only streamlines operations but als

233、o reduces the need for extensive warehousing.Moreover,GenAI has the potential to create operational cost savings through intelligent buildings.These buildings,equipped with AI automation for features like heating,ventilation and air conditioning(HVAC),lighting,alarms,and security,present a futuristi

234、c approach to property management.Additionally,the integration of GenAI with chatbots can lead to further operational cost savings in consumer-facing applications at hotels,retail spaces,and residential buildings.GenAI will lead to increased real estate demand in tech hubsA noteworthy trend is the e

235、mergence of AI clusters in established tech hubs.Markets characterized by a concentration of AI talent,such as tech hubs,innovation centers,and universities,are expected to witness increased demand for infrastructure and real estate to house GenAI related firms.To illustrate,OpenAI has declared Lond

236、on as its inaugural international hub for AI technology and policies.Hsinchu in Taiwan,hosts an AI-focused business park serving as a tech hub and is home to leading chipmakers globally.Shanghai is intensifying its AI investments,including the establishment of a significant computing center in the c

237、oastal LinggangNew Area,responding to the rising demand propelled by GenAI.Singapore,demonstrating its commitment to becoming an AI hub,has launched an updated National AI strategy aimed at developing AI-related talent,models,and infrastructure.Another industry that could ride on the tailwinds of Ge

238、nAI is the semiconductor industry,which is central to the field of AI and pivotal in powering AI systems.With the renewed focus on AI,more semiconductor players are set to increase their investments,thereby increasing the demand for semiconductor facilities and high specification factories or busine

239、ss park space for ancillary businesses.For example,chip giant Nvidia will potentially announce some large investments in Singapore on the back of its AI ambitions.Recognizing these trends,companies and investors could strategically positioning themselves at these hubs to fully harness the expansive

240、potential presented by GenAI.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsInvestment opportunities with GenAIAs the demand for high-performance computing associated with AI workloads continues to grow,data centers are poised to play a crucial role

241、.GenAIs influence on data centre demand is expected to be significant,with accelerated adoption of high-performance computing and incremental space needed for the storage of training data.Thereby,investment opportunities arise with the need for upgrading existing data centre facilities,or the develo

242、pment of new ones to accommodate the high-power density requirements(AI-capable data centres require four to five times more power than normal ones)and increased data storage requirements.The real estate investment landscape is experiencing a transformation with the use of GenAI;real estate investme

243、nt professionals have the opportunity to utilize GenAI for parsing through unstructured data,evaluating the performance of properties,and assessing existing lease terms.For instance,when selecting an optimal mall for investment,the algorithm can be provided with information such as catchment and hou

244、sehold income within a specific radius.Similarly,in the case of investing in a warehouse,the algorithm can consider factors like e-commerce volume in the locale,proximity to residential areas,and accessibility to ports or airports.This data-driven approach facilitates a more informed analysis of ava

245、ilable properties,enabling the prioritization of assets for deeper exploration and also determining appropriate pricing strategies.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAdopting GenAI strategically It is critical to approach the adoption of

246、 GenAIwith a strategic mindset if the task is technically feasible and creates business value.Standardizing data,adopting database-driven systems,and building engineering teams will then be necessary to ensure effective implementation.For instance,an AI tool that has undergone training using a build

247、ings historical maintenance requests can come up with the appropriate times for repair and upkeeping.Similarly,a tool trained on the operating metrics of a real estate portfolio can provide insights about performance,aiding in investment decisions and reporting,including ESG monitoring.In commercial

248、 buildings,Internet of Things sensors and computer vision applications can offer insights into space utilization.Tenant apps and dashboards can serve as valuable data sources;information such as the type of amenity space booked by a residential tenant,the stores patronized by a shopper,or the servic

249、es required by a tenant can be gathered and organized for further analysis.However,supporting infrastructure for AI clusters,including advanced data centers,robust energy grids,and connectivity infrastructure,have to first be enhanced to support the growing use of GenAI.Despite the transformative po

250、tential of GenAI,there are important considerations and potential challenges.GenAI is still a nascent technology,and there are questions surrounding biases in training data and the appropriateness of certain use cases.Risks associated with unintended consequences and compliance issues must be carefu

251、lly weighed,particularly in areas with high stakes,such as emergency response,data privacy,long-term leases,or investment decisions.In conclusion,as real estate continues to embrace technological advancements,GenAI could take centre stage;it presents unprecedented opportunities for innovation and ef

252、ficiency.By understanding and adopting GenAI,industry players can reshape their operations,unlock new strategies,and reap immense benefits from this technology.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsCATHERINE HECATHERINE HEHead of Research H

253、ead of Research Colliers SingaporeColliers SingaporeCatherine currently heads Research at Colliers,Singapore.She is responsible for producing key market and economic insights,forecasts,thought-leadership papers,and contributes actively to business development initiatives,investment recommendations,c

254、lient presentations as well as local and regional media.She enjoys using data and technology to uncover opportunities,insights,and improve processes for investing and real estate,and is passionate about proptech.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternati

255、ve SectorsREITs:Driving Institutionalization in the Commercial Real Estate SectorInstitutional investors continue to place their bet on the Indian commercial real estate sector,on the back of increased opportunities,growing institutionalisation,and resilient demand.Over the last few years,REITs(Real

256、 Estate Investment Trusts)in India have been established as a promising alternate real estate platform and hold a huge potential to attract investments into commercial real estate sector from both institutional and retail investors.Post the listing of three office REITs,Indian retail segment saw its

257、 maiden listing in 2023.By Vimal NadarAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsThe three listed office REITs in India,namely,Embassy Office Parks,Mindspace Business Parks and Brookfield India REIT,account for around 12%of the total existing Gr

258、ade A office stock with about 82.7 mn sq ft of office stock.Additionally,the first retail REIT,Nexus Select Trust,launched in India in May 2023,accounts for about 10 mn sq ft of assets under management,as of December 2023,spread across 17 Grade-A urban retail centres in 14 cities.Though still at a n

259、ascent stage as compared to other regional markets,listed office REITs in India have successfully provided an annualized distribution yield return of 6-7%.The overall returns have been in the range of 12-15%annually,considering dividend income and capital appreciation.REITs in India-Still at early s

260、tages compared to other global markets India is still a miniscule market compared to other global countries with respect to market capitalization of REITs.Indias REIT market capitalization is still less than 10%as compared to USA and other counterparts in the APAC.However,Indian REITs demand 73%lowe

261、r capital requirements,which makes funding avenues more cost-effective as compared to REITs in other APAC markets like Singapore.34%44%30%20%20%22%9%5%16%37%31%32%Embassy REITMindspace REITBrookfield REITTechnologyBFSIConsultingOthersAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,P

262、rospects,and Alternative SectorsOperational parameters of REITs in India remain buoyantDespite global economic headwinds,the operational parameters of the four Indian REITs remained buoyant,with average occupancy levels of about 80-90%and a weighted average lease expiry of about 7-7.5 years as of De

263、cember 2023.On an annual basis,gross leasing in the three office REITs maintained a sturdy momentum,whereas rentals witnessed a rise.At the same time,the net operating income of the three1REITs showed healthy growth on an annual basis.Tech players account for major tenant base of office REIT assets

264、As of December 2023,within the top six Indian cities,technology,BFSI,consulting and healthcare have leased majority of spaces in REIT assets.About 30-40%of the existing tenants in REIT portfolio account of the technology sector.However,the tenant mix of Indian office REITs have started to diversify

265、with occupiers from BFSI,consulting and healthcare sectors accounting for significant share in the leasing pie.Demand from Global Captive Centres(GCCs)is also rising steadily,comprising of about 70%of total leasing in office REIT assets.Since GCCs in India are emerging as centers of excellence and i

266、nnovation,REITs are expected to see sustained growth in spaces take-up by such capability centersin the next few years.1Nexus Select Trust was listed in May 2023,hence not consideredEvolving regulatory environment making REITs more attractive for investmentsThe entry barriers for investment into REI

267、Ts are being relaxed to attract greater retail participation and drive higher market activity through timely regulatory amendments.The legal and operational framework continues to evolve,to make it amenable for an average investor.In terms of entry barriers,the minimum investment in a REIT has been

268、reduced from INR50,000 entailing a lot size of 200 units to INR10,000-15,000 with a lot size of one allowing higher participation of retail investors.Foreign Portfolio Investors(FPIs)can now invest in debt securities issued by REITs which encourage global fund participation in Indias office growth s

269、tory.These reforms are expected to improve investor sentiment towards REIT platforms and attract higher domestic as well as foreign capital.In November 2023,Securities and Exchange Board of India regulated the framework for small and medium REITs with an asset value of at least Rs 50 crore,thereby e

270、xpanding the ambit of fractional ownership of real estate.This was in addition to the existing framework for large REITs having asset value of Rs 500 crore.The amendment enabled small and medium REITs to tap the investments flowing in real estate markets and create their own separate scheme for owni

271、ng real estate assets through SPVs.Thereafter,in December 2023,the Ministry of Industry and Commerce permitted floor wise denotification in the Special Economic Zones(SEZ).The amendment is expected to boost the leasing activity across SEZs,bringing down the overall vacancy levels across SEZs.REITs a

272、re expected to benefit from this as about two-thirds of the existing office REIT stock across the top 6 cities in India fall under SEZs.Source:REIT investor report December FY2024Tenant profile of existing office REITsAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alt

273、ernative SectorsAlbeit at a nascent stage,REITs already account for an impressive 12%of the overall Grade A office stock in the country.Additionally,about 380 mn sq ft of Grade A office space,of the existing 708 mn sq ft of office stock,qualifies to be listed as REITs,indicating a huge potential for

274、 expansion.With the existing REIT-worthy Grade A stock,Indias REITable share could rise up to 65%.This aligns with other APAC countries like Singapore and Japan which have more than 50%of their office portfolio under REITs.Existing office stockExisting office REIT stockREIT-worthy stockArea(mnsq ft)

275、70883380During 2023,the office sector continued to drive capital inflows in the real estate sector,commanding 56%share.The year 2024 too,is likely to continue to see a robust capital inflow in the commercial real estate sector,where the REIT segment will be the preferred choice of investors.With sta

276、ble repo rate and inflation within the RBIs target range,bond yield is likely to remain range-bound in India.Further,with an expected reversal in the interest cycle over the next few quarters,yield spread between bonds and real estate is likely to widen,making commercial real estate and in turn REIT

277、s an attractive proposition for investors.Secondary Business Districts(SBDs):Potential hubs for REITsSecondary business districts(SBDs)are emerging as the potential hubs for upcoming REIT market,as over 55%of the existing Grade A stock within SBDs can be come under REITs in future.Amongst these SBDs

278、,the SBD of Hyderabad holds the highest quantum of REIT-worthy stock with 32%share,closely followed by Bengaluru at 31%.At the same time,about half of the total Grade A office stock in Peripheral Business Districts(PBDs)and Central Business Districts(CBDs)across the top six cities is REIT-worthy.Sou

279、rce:Colliers,IndustryNote:Data pertains to Grade A stock of top six cities as of 2023 endMicro marketScope of REITable stockCBD49%SBD55%PBD51%Source:ColliersNote:Data pertains to Grade A stock of top six cities as of 2023 endPan India micro market wise share of REITable stockOutlook for REITsAPREA K

280、nowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsREITs making ground for diversifying into other sectorsThe listing of Nexus REIT in May 2023 has expanded their horizon in the retail sector.Players in the industrial sector have started consolidating their po

281、rtfolios as they are now eyeing Industrial REITs buoyed by robust demand in the sector.In the next few years,REITs are likely to be mature and expand to other asset classes such as Data Center,Hospitality,Healthcare,and Education.REITS strategically partnering to build tech platformsAdoption of tech

282、nology is picking pace in domains like construction management,property management and energy management by REITs in India.The listed REITs are entering into partnerships and joint ventures with technology and engineering firms to leverage their digital and tech platforms for conducting infrastructu

283、re upgrades,demolitions and even developing scalable data centers.Going forward,REITs in India might also invest in launching their own Proptech and cloud platforms to attract more demand for their properties.Green initiatives by REITsPresently,all three office REITs have a 5-star rating by GRESB(Gl

284、obal Real Estate Sustainability Benchmark)for their ESG performance reflecting their commitment for sustainable growth.Going ahead,Indian REITs are actively seeking green building certifications to meet sustainability and energy efficiency standards and supporting Indias net-zero targets by 2050.Acc

285、ording to the goals set by REITs,there is an inclination towards health and wellness with the aim of aligning with best global practices for sustainable development.For their long-term goals,REITs have targeted to reach net-zero by 2040-2050.They also aim to certify 95-100%of their existing and new

286、developments with LEED/IGBC certifications,with minimum gold rating as their short-term goal.Furthermore,by 2025,the existing REITs are expected to increase their renewable energy consumptions by 30-35%from the present levels.In the coming years,the tenant base will continue to be dominated by GCC p

287、layers,led by robust leasing activity in office market.Technology,BFSI and healthcare players will continue to maintain the current pace in leasing Grade A assets in REITs portfolio.As the REIT market continues to mature and expand in India,it will be attracting more domestic and international inves

288、tors,diversify its asset classes and provide stable returns to investors.Considering its potential to grow,the policies can be further made more attractive through tax concessions and relaxing norms.Overall,the future of REITs looks optimistic,led by its regulatory framework,robust demand and conduc

289、ive ecosystem.City wise share of REITable stock in SBD32%31%14%9%7%7%HyderabadBengaluruChennaiDelhi NCRMumbaiPuneSource:ColliersNote:Data pertains to Grade A stock as of 2023 endAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsVIMAL NADARVIMAL NADARSe

290、nior Director&Head of ResearchSenior Director&Head of ResearchColliers IndiaColliers IndiaVimal has a cumulative experience of about 15 years post qualification(as a Chartered Accountant)and joined Colliers as the Head of Research.He is responsible for leading and managing India Research operations.

291、He focuses on thought leadership through timely and insightful content to support business growth while elevating the brand value of the company.Prior to this,he led research thought leadership for leading International Property Consulting firms.He began his professional career with Crisil;business

292、research and consulting being his core areas of work.His areas of expertise include business assessment,demand-supply analysis,market entry strategy,strategic road mapping,etc.in sectors such as real estate,Cement,BFSI and other sub-sectors within the infrastructure domain.REITs and InvITs:Evolution

293、 of the Regulatory Landscape in IndiaBy Pratichi Mishra,Dhanush Dinesh and Gunjeet SinghAPREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsBusiness trusts are used across the globe as an alternative to the traditional mode of conducting business through

294、 corporations.Business trusts play a significant role in global capital markets,particularly in Asia.Singapore and Hong Kong were among the first Asian jurisdictions to introduce the concept of business trusts in the early 2000s.India introduced real estate investment trusts(REITs)and infrastructure

295、 investment trusts(InvITs),or business trusts,in 2014.In India,business trusts are organized as private trusts and registered with the Securities and Exchange Board of India(SEBI),the Indian securities regulator.The parties to a business trust comprise a trustee,an investment manager or manager(IM),

296、one or more sponsors,sponsor groups(entities identified based on their relationship with the sponsor)and a project manager(only for InvITs).Listing of units on the stock exchanges is mandatory.REITs and InvITs are required to distribute at least 90%of their net distributable cash flows(NDCF)to unith

297、olders.As the regulatory regime for REITs and InvITs in India approaches the completion of a decade,it is interesting to reflect on the evolution of the regulations.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsAPREA Knowledge Brief Volume 12REITs

298、Reconfigured:Growth Markets,Prospects,and Alternative SectorsEvolution of the Regulatory Landscape for REITs and InvITs in India2014-2017:The initial years of REITs and InvITs in India2018-2019:Deepening of the markets for REITs and InvITs2020-2021:Resilience through a global pandemic and developmen

299、t of the market2022-2023:Moving towards a more prescriptive approach to regulation 2014-2017:The initial yearsUnder the original regulations,the listing of units of REITs through initial public offerings(IPOs)and of InvITs through IPOs or private placement was mandatory.REITs and InvITs were initial

300、ly envisaged as institutional products,with a minimum investment of INR 1 million in publicly-offered InvITs,INR 10 million in privately-placed InvITs and INR 0.2 million in publicly-offered REITs.A maximum of three sponsors was permitted and sponsors were required to hold a certain minimum percenta

301、ge of units post-listing to ensure skin-in-the-game.After the regulations were issued in September 2014,various circulars and amendments were issued to operationalize the framework for IPOs,private placement,listing and post-listing compliance.Restrictions on the maximum number of sponsors were also

302、 removed.The tax regime for business trusts was introduced,the exchange control regulations were amended to provide for foreign investment in business trusts and various categories of domestic investors,including mutual funds,insurance companies,pension funds and provident funds,were permitted to in

303、vest in InvITs and REITs.Listed REITs and InvITs were permitted to issue listed debt securities.The first InvIT was registered with the SEBI in 2016 and listed on the stock exchanges through an IPO in 2017.The first REIT was registered with the SEBI in 2017.2018-2019:Deepening of the marketsIn 2018

304、and 2019,the IPO and private placement processes,investment portfolio requirements,leverage thresholds and certain other operational matters were further streamlined.Participation by strategic investors(i.e,investors undertaking a firm commitment to invest even prior to anchor investors)was introduc

305、ed for REIT and InvIT IPOs.The minimum subscription and trading lot for REITs and publicly-offered InvITs was reduced.Guidelines for follow-on offerings by listed InvITs and REITs were issued.The first REIT listed on the stock exchanges in 2019.Further,a framework for unlisted InvITs was introduced

306、and the conversion of privately-placed listed InvITs to unlisted InvITs was enabled.Also,commercial banks in India were permitted to provide lending and credit facilities to InvITs.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative Sectorswere introduced(simil

307、ar to listed companies in India).Unitholders holding 10%or more of the unitholding of a REIT/InvIT were permitted to nominate one director for appointment on the Board.The mandatory minimum holding requirements for sponsors/sponsor groups were made stricter and the concept of sponsor groups was intr

308、oduced in the InvIT regulations.Holding of a percentage of the total unit capital of a REIT/InvIT,which reduces over the life of the REIT/InvIT(subject to a maximum value of INR 5,000 million after the completion of three years from listing),was made mandatory for the sponsors/sponsor groups.Such un

309、its were not permitted to be encumbered.REITs and InvITs that were listed prior to the amendment could benefit from certain grandfathering provisions.2020-2021:Resilience through a global pandemicDuring this period,the minimum investment and trading lot for REITs and publicly-offered InvITs were red

310、uced further and brought at par with listed equity.Mandatory minimum holding requirements for sponsors of REITs post-listing were relaxed slightly and provisions relating to declassification of sponsors of REITs/InvITs were introduced.Rights issues for REITs and InvITs were enabled.Further,certain c

311、orporate governance requirements were made applicable to listed InvITs and REITs with outstanding debt securities exceeding a certain threshold.The SEBI also introduced the concept of a regulatory sandbox for promoting innovation in products,processes,services and business models in the securities m

312、arket(including REITs and InvITs)in a live testing environment for a specified period.Given the COVID-19 pandemic,temporary relaxations were provided to REITs and InvITs,including timelines for regulatory filings.A framework for conducting unitholder meetings through electronic means/video conferenc

313、ing was also introduced.2022-2023:Moving towards a more prescriptive approach to regulationIn 2022,the SEBI took a policy decision to discontinue the framework for unlisted InvITs.At the time,there were three unlisted InvITs,which subsequently listed their units in 2023.Further,the maximum timelines

314、 for listing for REITs/InvITs were reduced.A framework for conversion of privately-placed InvITs to publicly-offered InvITs was also notified.2023 saw significant changes to the regulatory regime.Mandatory governance requirements,including with respect to the composition of the board of directors of

315、 the IM(Board),constitution of committees and eligibility of independent directors APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsRecently,the SEBI approved the introduction of a regulatory framework for small and medium REITs.Also,proposals for the

316、 introduction of unit-based employee benefit schemes and certain other matters were issued for public consultation.In conclusion,the regulations for business trusts have kept pace with the evolving nature of the product and a diversifying investor base,particularly increased retail participation.The

317、 evolution of regulatory landscape reflects the dynamic nature and growing popularity of REITs and InvITs in India.The concept of self-sponsored IMs was also introduced.Sponsors of REITs or InvITs that were listed for at least five years were permitted to disassociate by conversion to a self-sponsor

318、ed IM.A self-sponsored IM would have the dual responsibilities of an IM and a sponsor under the regulations,including with respect to mandatory minimum holding of units.In addition,provisions for dealing with unclaimed distributions,online dispute resolution for investor grievance redressal and spec

319、ific modes to achieve compliance with the 25%minimum public unitholding requirement applicable to REITs and InvITs were introduced.Further,the mechanism for calculation of NDCF for distributions was overhauled.Regulatory clarity under the tax regime was also provided on the taxation of the return of

320、 capital component of distributions.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alternative SectorsPRATICHI MISHRAPRATICHI MISHRAPartnerPartnerS&R Associates,Mumbai,IndiaS&R Associates,Mumbai,IndiaPratichi Mishra is a partner at S&R Associates.Her areas of practice

321、 include capital markets,mergers and acquisitions,foreign investments,regulatory,advisory and general corporate matters.She advises issuer companies,business trusts and investment banks on a range of capital markets matters,including initial public offerings,private placements,institutional placemen

322、ts,rights issues,preferential allotments,debt offerings,bulk/block trades,takeovers and regulatory matters.Pratichi is a member of the Hybrid Securities Advisory Committee,a standing committee set up by the Securities and Exchange Board of India(SEBI)to advise SEBI on issues related to the developme

323、nt and regulation of primary and secondary markets of REITs,InvITs and other hybrid securities in India.She is also a member of the Expert Committee on REITs and InvITs in GIFT International Financial Services Centre.APREA Knowledge Brief Volume 12REITs Reconfigured:Growth Markets,Prospects,and Alte

324、rnative SectorsGunjeet Singh is an associate at S&R Associates.His areas of practice include capital markets,regulatory,advisory and general corporate matters.Gunjeet advises issuer companies,business trusts and investment banks on a range of capital markets matters,including initial public offering

325、s,private placements,institutional placements,rights issues and regulatory matters.GUNJEETGUNJEET SINGHSINGHAssociateAssociateS&R AssociatesS&R Associates,NewNew DelhDelhi i,IndiaIndiaDhanush Dinesh is an associate at S&R Associates.His areas of practice include capital markets,mergers and acquisiti

326、ons,regulatory and general advisory matters.Dhanush advises issuer companies,business trusts and investment banks on a range of capital markets matters,including initial public offerings,private placements,institutional placements,rights issues,preferential allotments,bulk/block trades,debt offering

327、s and regulatory matters.DHANUSHDHANUSH DINESHDINESHAssociateAssociateS&R Associates,Mumbai,IndiaS&R Associates,Mumbai,IndiaF FOLLOW US ONOLLOW US ONLinkedInWeChatX(Twitter)FacebookInstagramSpotifyYoutubeWWW.APREA.ASIAAsia Pacific Real Assets Association18 Robinson Road#15-01Singapore 048547enquiriesaprea.asia