KUALA LUMPUR: Sound government policies have helped Malaysian real estate investment trusts (REITs) perform well in 2024, despite a challenging environment, according to the Malaysian REIT Managers Association (MRMA).
The association said the Bursa Malaysia REIT Index is up seven per cent year-to-date as global benchmark interest rates have peaked, and sound fundamentals have supported strong earnings growth for Malaysian REITs.
MRMA chair and Axis REIT Managers Bhd chief executive officer Leong Kit May said the performance of the Malaysian REIT commercial sub-sector has been bolstered in part by proactive government policies, such as the 30-day visa exemption for Chinese and Indian visitors, which contributed to a steady recovery in inbound tourism.
She added that tourist arrivals to Malaysia in the first half of 2024 (1H24) grew by 30 per cent, while tourism receipts increased by over 50 per cent compared to the same period last year, boosting hotel occupancy rates and supporting retail sales at flagship malls.
"Meanwhile, the industrial property sub-sector is enjoying stable occupancy rates and steady rental reversions driven by a sharp rise in foreign direct investments into Malaysia's industrial space in 2024.
"Total approved investments in Malaysia grew almost 13 per cent in the first quarter of this year (1Q24) amid favourable government policies and incentives.
"These include strategic policy efforts to attract investments in high growth industries such as data centres, with Johor Bahru emerging as one of the fastest-growing data centre markets in Southeast Asia.
"The office sector has also seen improvement in demand for space as more and more companies are moving their workforce back to physical offices," she said in a statement.
Adding further, Leong said that against this backdrop, several Malaysian REITs have pursued portfolio expansion in 2024.
She said notable acquisitions have been seen in the industrial, hospitality, and retail REIT spaces.
She noted that these, together with major asset enhancement initiatives are expected to continue driving valuation and earnings growth in the years ahead. Malaysian REITs came in the investment landscape with the first listing in 2005. According to MRMA, rapid growth followed when the defensive nature of the REIT was embraced by the investing public from pensioners to institutional investors.
Market capitalisation quadrupled from RM9 billion in 2010 to RM41 billion as of Dec 31, 2023. There are now 19 listed real estate investment trusts (REITs) in Malaysia today, and M-REITs have become a significant component of the listed capital markets.
Meanwhile, MRMA said Malaysian REITs have provided investors with diversification, stakeholders income stability, inflation protection and delivering long-term dividend performance with lower risk and volatility.
As a result, Malaysian REITs were soon recognised as an integral part of the Malaysian Capital markets when Bursa Malaysia established the M-REIT Index in Oct 2017.
Furthermore, MRMA said the 2020-2021 stock market downturn impacted all businesses due to the Covid-19 pandemic.
Despite Malaysian REITs, especially retail and office REITs, being affected, they bounced back with strong share price recovery, continued dividends, and positive returns.
Recent acquisitions are set to further improve their performance. On the ESG front, MRMA said Malaysian REITs are in various stages of fulfilling their zero carbon strategies.
Embracing the new technologies driven by artificial intelligence (AI) and proptech also play a very important part in the future of Malaysian REITs enabling them to automate processes, reduce costs, optimise the usage of power and limit the wastage of other resources which will drive profits and shareholder returns.
Diversifying portfolios through the acquisition of alternative asset classes will play a prominent role in the future of Malaysian REITs, providing investors with more investment choices.