Although the covid pandemic has had a major impact on the Pacific Rim office markets, Real Capital Analytics reports show that considerable regional real estate investment attention has focused on the traditional office sector in recent years. Within a Pacific Rim office REIT-based portfolio, Australia has played a more prominent role than Japan, the US or Singapore, according to a new analysis published in my PhD thesis.
Key players of Pacific Rim office REITs
Strong growth of Pacific Rim office REITs has been seen in the past nine years. The size of Pacific Rim office REITs has grown from US$48.5bn in July 2006 to US$146.4bn in December 2018 – a 300% increase – according to my constructed database, with consideration of survival bias.
The most vigorous growth in market capitalisation was in the US, with a 384% increase since 2006 – up from US$22.4bn in July 2006 to US$86.3bn in December 2018, ahead of Singapore (309%; US$11.3bn in 2018), Australia (219%; US$13.2bn) and Japan (218%; US$35.5bn). As of a proportion of the market, office REITs averagely accounted for 42.0% of the size of the REIT market in Japan over the last nine years, followed by that in Singapore (15.9%), the US (13.0%) and Australia (12.2%).
Players of Pacific Rim office REITs are Boston Properties (US; US$ 17.4bn), Alexandria Real Estate Equities (US; US$12.4bn), Kilroy Realty Corporation (US; US$6.3bn), Nippon Building Fund (Japan; US$8.9bn), Japan Real Estate Investment (Japan; US$7.8bn), Japan Prime Realty (Japan; US$3.5bn), Dexus (Australia; US$7.6bn), Investa Office Fund (Australia; US$2.4bn), CapitaLand Commercial Trust (Singapore; US$4.8bn) and Keppel REIT (Singapore; US$2.8bn).
Investment performance of Pacific Rim office REITs
Compared with other property sectors in the Pacific Rim region, office REITs had lesser average annual returns over the past nine years. The exceptions are Australia and Singapore. On the other hand, office REITs provided stronger annual returns than both stocks and bonds in each case. However, it was the poorest performer among all property sectors in the US.