Manya Rathore
Research expert covering India
REITs market worldwide - statistics & facts
Real estate investment trusts (REITs) offer investors an easy way to diversify their portfolio with real estate assets. REITs have proven to be a profitable investment vehicle that can compete with other stock indices, such as the S&P 500 and the Nasdaq Composite. Recently, the real estate market suffered higher interest rates, tightening lending conditions, and declining prices. As a result, the performance of the REITs market has worsened. But how has this affected different market segments?
Despite a bumpy economic landscape, the REITs market is well positioned to head for recovery. Some of the factors aiding that recovery include an improvement in economic growth and the decrease in interest rates.
Spotlight on the largest REIT markets and companies
The United States has the largest REIT market, but REITs are also a popular form of investment in other countries, such as Japan, Singapore, the United Kingdom, and Australia. In 2023, the U.S. REITs market had a market cap of close to 1.4 trillion U.S. dollars. That was over 10 times higher than the second-largest market – Japan. Another fact that demonstrates the dominance of the U.S. is that it is the home to the largest companies. Some of them include the industrial and logistics real estate firm ProLogis, the wireless and broadcast communications firm American Tower Corp, and the healthcare infrastructure firm Welltower. Outside the U.S., the largest company was Goodman Group – a Sydney-headquartered logistics and industrial real estate provider.Which types of REITs perform best?
As REITs specialize in different asset classes, they are affected by shifts in demand for different property types. Breakthroughs in artificial intelligence and the growing demand for computing power have given rise to data center REITs, making them the only market segment trading at a premium to net asset value (NAV) in the United States as of February 2024. Conversely, office REITs, which suffered declining demand following the COVID-19 pandemic, traded at a discount to NAV, with the average market price of office REITs 25 percent below the net value of their assets. The office submarket has contracted notably since before the pandemic: Between 2019 and 2023, the aggregate market cap of U.S. office REITs more than halved. Industrial REITs stood at the other end of the spectrum, with an increase of 33 percent.Despite a bumpy economic landscape, the REITs market is well positioned to head for recovery. Some of the factors aiding that recovery include an improvement in economic growth and the decrease in interest rates.
