REITs, Once Overlooked Amid KOSPI Bull Run,
Surpass 10 Trillion Won for the First Time Ever
The market capitalization of domestically listed REITs (Real Estate Investment Trusts) has surpassed 10 trillion won for the first time ever. This milestone comes 25 years after the introduction of the system in 2001.
According to the Korea REITs Association and the Korea Exchange on March 1, as of the closing price on February 27, the total market capitalization of the 25 REITs listed on the domestic stock market was 10.0381 trillion won.
REITs are financial products that pool small amounts of capital from numerous investors to invest in large income-generating real estate such as office buildings, logistics centers, and shopping malls, and then distribute rental income as dividends. The key point is that real estate investment, which previously required tens of millions of won, can now be made as easily as buying a single share through a securities company’s app.
The market capitalization of REITs surpassed 8 trillion won in January last year, broke through 9 trillion won in September of the same year, and exceeded 10 trillion won in just five months. Compared to February last year (8.4964 trillion won), it increased by 18.1% in one year. Getty Images
18% Growth in One Year, Three Members in the '1 Trillion Won Club'
The market capitalization of REITs surpassed 8 trillion won in January last year, broke through 9 trillion in September of the same year, and exceeded 10 trillion won in just five months. Compared to February last year (8.4964 trillion won), it increased by 18.1% over the course of a year.
The number of REITs with a market capitalization exceeding 1 trillion won, known as the '1 Trillion Won Club,' has increased to three: SK REIT (1.779 trillion won), Lotte REIT (1.4015 trillion won), and ESR Kendall Square REIT (1.0643 trillion won). Hanwha REIT is also on the verge of joining the club, with a market capitalization of 919.6 billion won.
As the benchmark KOSPI index continues its bullish rally, breaking through the 6,300 mark, capital rotation is flowing into REITs, which had previously been overlooked as "unexciting dividend stocks." Although the relative return of REITs compared to the index is still lagging behind due to KOSPI's steep rise, this also suggests that REITs remain undervalued and attractive even in the midst of a booming market.
The trend of interest rate cuts that began at the end of 2024 is also acting as a double boon for REITs. As bank deposit rates fall, the dividend appeal of REITs becomes more prominent. At the same time, the interest burden on loans taken out by REITs to purchase real estate is reduced. As of the end of 2024, the average annual dividend yield of listed REITs was 7.5% based on their offering price and 8.1% based on the market price, far exceeding regular bank deposit rates. In addition, since REITs are legally required to distribute at least 90% of distributable income to shareholders, they serve as an attractive option for investors seeking stable cash flow, bridging the gap between deposits and stocks.
Corporate Bonds and Blind Funds Instead of Paid-in Capital Increases... The Industry's Fundamentals Are Changing
The achievement of a 10 trillion won market capitalization is not simply due to market sentiment. The fundamentals of the REIT industry itself are changing. The chronic weakness of listed REITs has been repeated paid-in capital increases. To acquire new properties, they had to raise funds by issuing additional shares, which diluted the stakes of existing shareholders and drove share prices down.
Recently, however, strategies for securing assets have diversified, favoring the issuance of corporate bonds or blind funds over paid-in capital increases. Samsung FN REIT restored its offering price by issuing corporate bonds to acquire new assets, while Shinhan Alpha REIT is pursuing the acquisition of prime assets in Seoul and Pangyo through a development-type blind fund established by Shinhan Financial Group.
Kyungja Lee, Head of Alternative Investments at Samsung Securities, analyzed, "In a market where you have to check daily whether artificial intelligence (AI) brings opportunities or doomsday, the defensive characteristics of REITs, which focus on land and buildings, are being re-emphasized." In fact, in the United States, more than half of REITs that reported earnings this year have raised their 2026 FFO (Funds From Operations) and dividend guidance, with notable improvements in the performance of senior housing, data centers, and retail REITs.
As the market expands, new listings are also picking up. While only one REIT was listed in 2024 (Shinhan Global Active REIT) and one last year (Daishin Value REIT), the mood changed this year as Hana Financial Group launched the public offering process for Hana Office REIT on January 25.
Hana Office REIT aims for a dividend yield in the high 6% range by including two office buildings in its portfolio. The representative domestic REIT ETF, TIGER REITs Real Estate Infrastructure, has already seen a net inflow of more than 200 billion won this year alone.
Still in Its Infancy-Which Means Opportunity
However, the Korean REIT market still has a long way to go. Compared to the United States (2,064 trillion won), Japan (156 trillion won), and Singapore (110 trillion won), 10 trillion won is just the beginning. On the other hand, this also means there is significant room for growth.
Joonhyun Cho, Head of Policy at the Korea REITs Association, commented, "Surpassing 10 trillion won in market capitalization is tangible proof of the trust that has been built up over 25 years," adding, "Compared to advanced countries, the growth potential is very large."
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