China’s Proposed Infrastructure REITs Likely to Attract Global Interest

China’s pilot scheme for establishing REITs in the infrastructure sector, announced in April, is likely to attract interest from around the world, Nareit President and CEO Steve Wechsler told a July 28 webinar hosted by the Asia Pacific Real Estate Association (APREA).

Sigrid Zialcita, CEO of APREA, described the announcement as a “milestone” and said the Chinese government is using the introduction of REITs as a mechanism to rejuvenate the economy. APREA estimates that initially, China’s REIT market could be worth up to $800 billion, making it the region’s largest in terms of market capitalization.

Wechsler said that as REITs are introduced in China, given the prevalence of e-commerce, “we can imagine that we’ll see great interest in the e-commerce economy tied to warehouse distribution and industrial parks.” He added that “what will pique interest around the world is the infrastructure element in the China REITs.”

Wechsler added that he expects China’s infrastructure REITs will be an “attractive” investment option that can build on the U.S. experience. He explained that in the U.S., REITs have been permitted to invest in certain types of infrastructure real estate for the last 60 years, but it’s only in the last 10 or 15 years that the infrastructure real estate sector has blossomed, particularly with respect to communications-related infrastructure.

“We see this as a big step forward on what’s been a long journey so far…we’re at an important bridging point between what’s been accomplished in the past with quasi-REIT regimes and looking ahead as China may more fully develop a REIT regime,” Wechsler said.

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