Which REIT sectors, geographies will perform well in 2021?

Australian office, industrial, Japan hospitality, Hong Kong retail may shine in the year ahead.

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

The outbreak of the coronavirus pandemic has affected the global economy in more ways than one. Most governments have implemented measures such as closing borders and social distancing, which have adversely affected transportation, retail, and tourism-related industries. At the same time, such developments have encouraged the rapid adoption of technologies and accelerated trends such as working from home and online shopping and entertainment.

These trends will likely persist in the post-pandemic era and will support demand for logistics assets and data centres. As a result, we believe that these sectors will stay resilient going forward. Meanwhile, the retail and office sectors will have to re-adjust to a new era.  Notably, retail landlords would have to take into account strategy changes towards omnichannel sales and marketing. Separately, changing tourists and consumer spending patterns will affect  leasing strategies and the design of shopping malls. For office landlords, adapting to employees’ new patterns of work is a must.

Also impacting the REIT markets are government-rescue measures. Most governments have pursued expansionary fiscal and monetary policies, including quantitative easing and ultra-low interest rates, to support industries that had been adversely affected. These supports have helped curb unemployment and stem any potential fall in economic growth.

Inadvertently, these monetary easing policies have also contributed to asset price reflation and supported real estate cap rates across most asset types. We continue to see substantial investment injections into commercial properties, with steady cash flows into Asia Pacific real estate, especially logistics properties, data centres, non-discretionary/large format retail properties, and selected residential rental properties in Japan and Australia. The policies have also supported the strong performance of retail and hospitality REITs in November, notably following news about vaccine development, as investment fund flows shifted from anti-pandemic plays to recovery beneficiaries.

In short, as the coronavirus vaccine becomes widely available in 2021, alongside the re-opening of borders, we expect retail and office properties to rebound. However,  a return to the pre-pandemic level of economic activities is likely to be slow as the rate of business closures and unemployment will likely take a while to ease. Hospitality REITs stand to benefit from an expected return of international travels following the vaccine rollout, while logistics and data centre REITs will benefit from technology trends that will likely become permanent post-pandemic.

Below are some of our projections of Asia Pacific’s developed REIT markets.


Despite Australia entering into a recession for the first time in 30 years and Victoria coming under repeated lockdowns, the pandemic impact on the country’s economy seemed to be relatively benign. The Australian government has responded with fiscal stimulus to soften the economic blow, with specific policies to support small businesses and homeowners. The Reserve Bank of Australia has also lowered its benchmark rate from 0.75% at the beginning of the year to an all-time low of 0.10%. We believe the coronavirus vaccine’s eventual rollout will lead to the re-opening of borders and facilitate a return of international travels and the normalisation of economic activities, which should be positive for the commercial property market, especially for office properties. Retail rental, especially CBD retail and shopping centres, will still be under pressure given the weakness in discretionary spending and the rise of e-commerce that affect retailers’ strategies. Thus, we are optimistic about Australia’s office and industrial REITs.


The coronavirus pandemic has derailed Japan’s economic recovery, with supply chain disruptions adversely affecting its manufacturing sector. The global suspension of air travel and the Tokyo Olympics Games’ delay have also hurt its retail and hospitality sectors. Despite the coronavirus pandemic, Japan’s real estate market has withstood its impact, especially the office and logistics sectors. These sectors have enjoyed steady rental growth and investment demand. We expect a moderate rebound in Japan’s economy in 2021, with the manufacturing sector, supported by rising domestic demand, already in recovery mode. We also expect the Bank of Japan to maintain its loose monetary policy, which provides further support to asset prices. Office and logistics rent should remain resilient for 2021. Meanwhile, the potential resumption of international travel and the Tokyo Olympic Games will boost tourism, which will underpin hospitality REITs.


Singapore, as an open economy and transportation hub, has been heavily hit by the coronavirus pandemic. However, its manufacturing sector, especially pharmaceutical, has remained relatively robust, which has helped mitigate some of the business impacts from the pandemic outbreak.  We expect Singapore’s economy to continue to recover. The city-state is likely to be a major beneficiary of the shift in global trade towards regionalisation. Given its strong manufacturing base and its position as a key financial and service centre for the ASEAN region, it stands to gain as the global manufacturing supply chain restructures.

We are positive on Singapore REITs, especially industrial REITs, because their valuations are attractive.


Hong Kong will likely face challenges from multiple fronts in the aftermath of social unrests in the second half of 2019. The city is also still coping with the impacts of the pandemic.

A critical challenge is its need to maintain its position as an international financial centre in a polarised world defined by China-US tensions. Separately, it must find new growth drivers while re-adjusting in a post-pandemic world where tourists’ behavioural patterns and corporates’ real estate demand have changed. We expect Hong Kong to enter a period of economic uncertainty which will continue to put downward pressure on commercial rents. Among the Hong Kong REITs, we expect retail REITs that focus on non-discretionary spending to outperform.

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