New Narratives on the SSE Bonds｜Meticulous Operations in Response to Fluctuations: Structural Opportunities in Industrial Park REITs

Industrial parks play a key role in China's market development, serving as a crucial engine for regional economic growth and industrial innovation and transformation. Although the sector faces perodic pressures on sales to supply ratio, the supply is at the final time of its peak volume, coupled with the continuous enhancement of operational and management capabilities of underlying assets, making industrial park REITs a promising long-term investment option to capitalize on China's industrial development dividends. It deserves sustained attention from investors.

In 2023, changes in tenants of certain underlying assets of industrial park REITs impacted project performance and attracted significant market attention. In 2024, with the gradual recovery of the economic fundamentals, it has been a steady rise in the occupancy rates of related REITs' underlying assets. which has been achieved through the formulation and adjustment of business promotion strategies, ongoing optimization of tenant structures, and the provision of high-quality service and support, thereby effectively advancing tenant acquisition and reducing vacancy rates.

This year, publicly offered REITs have showcased a promising market ecosystem characterized by the coordinated development of investment and financing and a fundamental equilibrium in market pricing, with a steady rebound in the overall trend of the REITs index. According to public data, since the beginning of this year, 15 REIT products have been listed on the Shanghai Stock Exchange (SSE), and fundraising expansion announcements have been issued for 6 REIT products, with several approved REIT products poised for the listing ceremony of knocking the gong in the SSE. Notably, within publicly offered REIT products, the industrial park sector has emerged as a significant player in the market, with its scale second only to that of highways. In particular, at the SSE, out of the 35 REITs currently listed, 10 fall under the industrial park sector. The total amount of raised funds reached 18.2 billion yuan, accounting for 18% of the total scale. Zhang Yu, head of the real estate and space services sector at the Research Department of China International Capital Corporation Limited, stated, "For investors, industrial park REITs represent one of the key investment vehicles to benefit from China's industrial growth dividends over the long term. In the short term, industrial park REITs present structural opportunities. Some plant-related projects have consistently shown operational resilience since they were listed. In the medium- to long-term analysis, under the current valuation, the industrial park REITs segment may already possess allocation value."

After three years of piloting, China's REITs market has established a solid foundation preliminarily. Looking ahead, industry experts widely agree that the publicly offered REITs market will demonstrate three major development trends. Firstly, with the dual-driver development paradigm of "initial offering + expanded offering," China's publicly offered REITs are anticipated to catch up with and surpass the number of listed REITs in the Japanese and Singaporean markets. Secondly, China's publicly offered REITs market is likely to continue showcasing the characteristic of "a large number with a small individual scale." However, the differentiation between the targets will become more pronounced. Finally, at the valuation level, the low-interest rate market environment supports overall REIT valuations, and the differentiation in valuations between sectors is more aligned with differences of fundamentals.

From Xinhua Finance on December 18, 2024

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The above information is provided for reference purposes only and does not constitute investment advice.