At the End of Last Year, Listed REITs Market Cap at 6.9414 Trillion KRW
Number Increased Compared to Previous Year but Size Shrunk
[Asia Economy Reporter Noh Kyung-jo] Last year, the size of listed REITs (Real Estate Investment Trusts) shrank due to the sharp rise in interest rates and the real estate market downturn. Although the number of REITs increased compared to the previous year, their market capitalization actually decreased.
According to the Korea REITs Association on the 29th, as of the end of last year, the market capitalization of 21 REITs listed on the domestic stock market was approximately KRW 6.9414 trillion.
Looking at the figures alone, the market capitalization, which surged from KRW 4.0442 trillion at the end of 2020 to KRW 7.4045 trillion at the end of 2021, shrank slightly by about KRW 500 billion in one year. However, considering that the number of listed REITs was 13 in 2020 and 18 in 2021, fewer than last year, the decline in market value per REIT is even greater.
REITs, indirect real estate investment products, have steadily grown since the introduction of related regulations in 2001. The number of domestic managed REITs increased from 219 in 2018 to 350 in 2022, and the asset size grew from KRW 43.2 trillion to KRW 87.6 trillion during the same period.
However, last year, rapid interest rate hikes made fundraising difficult and investor interest declined, causing the listed REITs market to suffer a severe setback. Some REITs postponed their listings or failed to meet their rights offering subscription targets. Among the listed REITs, the youngest, KB Star REITs, saw its stock price fall below the public offering price from the first day of listing in October last year.
As market conditions worsened, the government announced the 'REITs System Improvement Plan' earlier this month. The aim is to alleviate industry burdens and maintain soundness through timely regulatory improvements.
Specifically, the plan focuses on expanding REIT investment assets, which are concentrated in housing (51.0%) and offices (25.9%), to sectors such as healthcare, home ownership, and urban complex development projects to reduce sensitivity to the real estate market. It also allows fundraising through the issuance of commercial paper (CP). Additionally, REITs will be recognized as owning real estate assets even if they hold only 20% of the shares in real estate corporations. The plan also includes provisions to decide on the cancellation of REITs and Asset Management Company (AMC) licenses based on the degree of intent or negligence.
The REITs industry welcomed the plan. Previously, the association stated, "In an economic situation where close field administration by the Ministry of Land, Infrastructure and Transport is difficult, this is a relief and is expected to contribute to the revitalization of the REITs market."
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