What are Real Estate Investment Trusts (REITs)?
REITs or real estate investment trusts, are listed securities that own, operate or finance income-producing real estate. This can include office towers, hotels, shopping centres and warehouses. REITs provide an investment opportunity that makes it possible everyday investors to benefit from valuable real estate1. Example of REITs include property developer, Mirvac Group and Scentre Group, which manages over 40 Westfield shopping centres.
Why invest in REITs?
REITs offer investors immediate exposure to a large-scale property portfolio, for a small upfront investment.
In contrast to purchasing property directly, REITs are highly liquid and traded on exchange easily, like ordinary shares. Investors are drawn to REITs primarily for their regular income, potential for capital appreciation and for portfolio diversification.
Listed real estate offers investors the opportunity to access the commercial real estate market with the added liquidity, transparency and regulation associated with investing in publicly traded stocks.
Types of REITs
The main REIT subsectors are:
Retail REITs
Typically refers to shopping centres in capital cities and regional areas, as well as freestanding shops like Bunnings.
Office REITs
These REITs own properties used as offices and include CBD office towers as well as suburban and regional office parks.
Industrial REITs
Includes warehouses, manufacturing buildings, industrial parks and multi-use buildings.
Residential REITs
Includes the development and ownership of land and apartments.
Diversified REITs
As the name suggests diversified REITs own and manage a mix of property types; they do business in two or more REIT subsectors.
Specialised REITs
These are A-REITs which are not engaged in any of the traditional REIT subsectors, for example Data Centre REITs.