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Global REITs Outperformed Equities in April

Japan and Australia REITs led among Asia-Pacific REITs

By Patrick Ma, Director, Listed Products and Research, Admiral Investments

May 5, 2021 – Global REITs, led by the US and UK REITs, outperformed global equities with a 7.3% rise during the month. US REITs, in particular, climbed 8.4% in April, while UK REITs rose 6.1%. 

Asia Pacific REITs also outperformed their corresponding equity indices during the month. REITs in the region rose 3.7% in April, with those in Japan and Australia taking the lead. Asia Pacific equities’ performance was flat, gaining just 0.1%, in the same month.

Japan REITs led the pack with a 3.9% gain, followed by Australian REITs at 3.8% in April. 

The continued recovery of Japan’s economy and increased institutional investor interest in Japan’s real estate assets drove Japan REITs’ performance. This is most notably reflected in the recent JPY 176 billion (US$ 1.6 billion) tender offer for Invesco Office J-REIT from Starwood Capital at JPY 20,000 per unit, the equivalent of  a 14% premium to the unit’s closing price pre-announcement of the deal.

Similarly, positive sentiment in the local Australian residential property market, supported by low-interest rates and expectations of an economic recovery, fuelled Australian REITs performance. Mirvac and Stockland were among the best performers.

Meanwhile, global equities climbed 4.7% in April as major economies continued on their recovery path with the rollout of vaccinations and the normalisation of trade and industrial production. 

In the US, the latest US$2 trillion infrastructure proposal from president Joe Biden further stimulated hopes of recovery. The latest Federal Open Market Committee (FOMC) meeting also confirmed the Fed’s loose monetary policy stance. 

Overall, a more robust economic growth outlook translated to stronger stock market performances. 

Looking ahead, the resurgence of the coronavirus pandemic in India and the renewed inflation scare could cloud the outlook for the global markets. 

Despite such concerns, we believe that the post-pandemic economic recovery will continue, which should be positive for global REITs. 

Increased activities in the commercial real estate market led by institutional investors suggest attractiveness in real estate assets under the current low-interest-rate environment. The recent positive sentiment is expected to provide support to REITs’ valuations.