Access to money is one of the key reasons for success in commercial real estate, especially here in the U.S. where REITs are everywhere. But with dividend yields near historic lows it begs the question: What is supporting these lofty prices? Even skyscrapers don’t grow forever. Now in Malaysia, where REITs seemed ready for prime time, things aren’t looking so good. Shefali Anand writes:
Until recently, Malaysia seemed to be on track toward building a successful market for real-estate investment trusts. Its market grew to a capitalization of around $10 billion, and included Kuala Lumpur’s Petronas Towers, the world’s tallest twin structures, and the first Islamic REIT.
But the mood has shifted, in a reversal that illustrates how REITs aren’t turning out to be a silver bullet for emerging markets trying to route public capital into real estate. New REIT listings in Malaysia have all but stopped over the past two years, and profits have fallen or been flat.
The market has yet to attract the hoped-for interest from international investors partly because the Malaysian REITs are much smaller, less liquid, and more uncertain than REITs in developed neighbors like Singapore and Hong Kong.
“They haven’t benefited from the wave of international capital which has been driving Hong Kong and Singapore REIT markets,” said Corrine Ng, portfolio manager of an Asian REIT fund at Australia’s APN Property Group Ltd . , which manages $2 billion. Ms. Ng’s fund has less than 2% of its portfolio in REITs issued by developing countries.
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E.J. Smith