Global perspectives: 2016 REIT report

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REITs have become an increasingly popular vehicle for real estate ownership. Global market capitalization now stands at approximately US$1.7t, up from US$734b in 2010. Since 2010, the US REIT market has grown by almost 150%, while the market capitalization of non-US REITs has more than doubled in United States dollars (USD) terms.

EY chart REIT market cap by market

Nascent markets

Most of the countries categorized as nascent have yet to see a listed REIT, even though basic REIT legislation exists.

India is a good example where tax legislation remains challenging, even though broader REIT rules are now in place.

This group represents the next wave of REIT markets as regulatory and legislative issues are ironed out. When that occurs, companies and REIT markets can move forward rapidly.

Emerging markets

The emerging markets category includes many of the younger REIT markets such as South Africa, Mexico, Ireland and Spain. There are two issues currently challenging these markets, neither of which are likely to be a long-term impediment to progress:

  1. Country-level metrics such as risk, real estate transparency, ease of doing business and general corporate governance are generally considered adequate rather than particularly strong.
  2. Market cap — Most countries have REIT sectors with market caps under US$10b.

Established and mature categories

The established and mature categories share many of the same traits. These countries have large, developed real estate markets that attract both domestic and international capital. They are enhanced by deep and liquid equity and debt markets, as well as a mature and reasonably open corporate environment.

One area of differentiation across this group is the propensity with which companies have adopted the REIT concept. Hong Kong and Germany are prime examples of regions where non-REIT structures remain the preferred listed concept. Japan and Singapore, and to a lesser extent the UK, are jurisdictions where REITs are important but are just one of the listed structures available.