Korea’s REIT market has attracted the interest of many investors looking at the commercial market on the back of low-interest rates during the current global pandemic.
“For a long time, institutional investors and public institutions primarily used the system to invest in real estate through private funds or employ it as a policy for housing development. However, individuals had limited access to these investment opportunities. The relatively stricter regulations for REITs are also the factors that hindered the revitalisation of their market, despite having a structure similar to real estate fund,” says JLL’s Korean research team.
According to JLL, the potential of the Korean market of listed REITs is as follows:
1. Low market capitalisation of listed REITs
The scale of REITs in the country is slowly increasing along with Korea’s commercial real estate market, however, JLL believes that the market capitalisation of the listed REITs has been quite limited so far with listed REITs in Korea accounting for 0.1% of its GDP compared to Japan, Australia and Singapore, which accounts for around 3-7%.
2. Ample liquidity and incentives for investment
The growth of listed REITs is accepted to accelerate with the support of government initiatives, which include lower tax rates and separate treatment, relative to private real estate funds. These will collectively spur the influx of capital from the public, notes JLL.
3. Diversity of incorporated assets
Investors have a variety of choices when it comes to REITs – which includes office, retail, service stations, and logistics centres. “If the market of REITs continues to boom, the transparency of Korea’s commercial real estate will improve further, offering more options to investors seeking new opportunities,” concludes JLL’s Korean research team.
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