To read the full version of this content please select one of the options below:

The added-value role of industrial and logistics REITs in the Pacific Rim region

Yu-Cheng Lin (Faculty of Built Environment, University of New South Wales, Sydney, Australia)
Chyi Lin Lee (Faculty of Built Environment, University of New South Wales, Sydney, Australia)
Graeme Newell (School of Business, Western Sydney University, Sydney, Australia)

Journal of Property Investment & Finance

ISSN: 1463-578X

Article publication date: 18 June 2020

Issue publication date: 30 October 2020

Downloads
346

Abstract

Purpose

As significant listed property investment vehicles, industrial and logistics REITs (I&L REITs) have recently enhanced their property portfolios, often replacing the traditional industrial properties with logistic properties to gain strategic exposure to recent e-commerce trends. This paper aims to assess the investment performance of I&L REITs by assessing the significance, risk-adjusted performance and portfolio diversification benefits of I&L REITs in the Pacific Rim region from July 2011 to December 2018. The strategic property investment implications for I&L REITs are also identified.

Design/methodology/approach

Monthly total returns from July 2011 to December 2018 were used to analyse the risk-adjusted performance and portfolio diversification benefits for I&L REITs in the United States, Japan, Australia and Singapore. An asset allocation diagram was employed to assess the strategic role of I&L REITs in a mixed-asset portfolio in each case.

Findings

I&L REITs generally possessed superior average annual returns compared with the other sub-sector REITs, stocks and bonds in the United States, Japan, Australia and Singapore between July 2011 and December 2018, with desirable portfolio diversification benefits. Importantly, a more significant role for I&L REITs was generally observed in the mixed-asset portfolio compared to the other sub-sector REITs in each of these four markets across the broad portfolio risk spectrum. This reflects I&L REITs delivering enhanced portfolio returns and offering portfolio diversification benefits in a mixed-asset portfolio in the United States, Japan, Australia and Singapore.

Practical implications

Property investors, particularly property securities funds (PSFs) and income-oriented investors, should consider including I&L REITs in their mixed-asset portfolios, as Pacific Rim–based I&L REITs provided an attractive REIT investment sub-sector, co-existing alongside the other sub-sector REITs and major asset classes in a mixed-asset portfolio in a Pacific Rim context, as well as being a portfolio diversifier. These results confirm the added-value and strategic role of I&L REITs in a mixed-asset portfolio, seeing I&L REITs as an effective investment pathway for I&L property exposure in the Pacific Rim region.

Originality/value

This is the first study to assess the investment performance of I&L REITs in the Pacific Rim region, evaluating their significance, risk-adjusted performance and portfolio diversification benefits, and the role of I&L REITs in a mixed-asset portfolio in the United States, Japan, Australia and Singapore. More importantly, this research is the first paper to provide empirical evidence on I&L REITs, which have often transformed their traditional industrial property portfolios with increased levels of logistics property to gain exposure to recent e-commerce trends. This research enables more informed and practical property investment decision-making regarding I&L REITs and their added-value and strategic role in a mixed-asset portfolio, as well as delivering effective I&L property exposure in the Pacific Rim region, with the added benefits of liquidity, transparency and fiscal efficiency.

Keywords

Citation

Lin, Y.-C., Lee, C.L. and Newell, G. (2020), "The added-value role of industrial and logistics REITs in the Pacific Rim region", Journal of Property Investment & Finance, Vol. 38 No. 6, pp. 597-616. https://doi.org/10.1108/JPIF-09-2019-0129

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited