According to a new report published by Allied Market Research, titled, “Real Estate Investment Trust Market, By Type (Equity REITs, Mortgage REITs, and Hybrid REITs), ByApplication (Industrial, Commercial, and Residential): Global Opportunity Analysis and Industry Forecast, 2022-2032". The real estate investment trust market was valued at $2.6 trillion in 2022, and is estimated to reach $4,228.7 billion by 2032, growing at a CAGR of 5.1% from 2023 to 2032.
Real estate investment trust markettrack record of reliable and growing dividends, combined with long-term capital appreciation through stock price increases, provide investors with attractive total return performance for most periods over the past 45 years compared to the broader stock market as well as bonds and other asset. Furthermore, most REITs operate along a straightforward and easily understandable business model by leasing space and collecting rent on its real estate, which is then paid out to shareholders in the form of dividends by the company. REITs must pay out at least 90% of their taxable income to shareholders, and most pay out 100%. In turn, shareholders pay the income taxes on those dividends.
According to Nareit, in total, REITs of all types collectively own more than $4 trillion in gross assets across the U.S., with public REITs owning approximately $2.5 trillion in assets. U.S.-listed REITs have an equity market capitalization of more than $1.3 trillion. U.S. public REITs own an estimated 575,000 properties and 15 million acres of timberland across the U.S. REITs invest in a wide scope of real estate property types, including offices, apartment buildings, warehouses, retail centers, medical facilities, data centers, cell towers, infrastructure, and hotels. Most REITs focus on a particular property type, but some hold multiple types of properties in their portfolios.
The integration of modern technologies such as data analytics and proptech (property technology) solutions is driving the real estate investment trust market growth. These technologies improve operational efficiency, shorten decision-making processes, and provide vital insights into market trends for REITs. Furthermore, data analytics for capital allocation drives themarket growth by enabling REITs to allocate capital more effectively and maximize returns for investors. By leveraging data to identify market trends, assess property performance, and make informed investment choices, REITs can optimize their portfolio allocation strategies and enhance risk-adjusted returns for investors. However, the high initial costs of implementing AI and proptech solutions in real estate limit the growth of the real estate investment trust market size. These upfront investments required to integrate AI technologies may deter certain REITs from fully leveraging the benefits of advanced solutions, hindering their ability to enhance operational efficiency and competitiveness. On the contrary, AI has the potential to improve operational efficiency across various real estate sectors such as healthcare and hotels, leading to increased demand for data centers and towers that will provide lucrative growth opportunities to the real estate investment trust market in the upcoming years.
By type, the equity REITs segment acquired a major share in 2022. This is attributed to the fact that these REITs generate a steady income stream for investors through rents and leases, offering a reliable source of dividend income and long-term capital appreciation. Moreover, equity REITs are highly liquid, allowing investors to easily buy and sell shares on major stock exchanges, which is a significant advantage compared to direct real estate investments. As the real estate market continues to evolve, equity REITs will remain a key driver of growth within the real estate investment trust industry, offering investors a unique opportunity to capitalize on the dynamic and technology-driven future of real estate investing.
By application, the industrial segment acquired a major real estate investment trust market share in 2022. This is attributed to the manufacturing and logistics companies that are increasingly realizing that they do not need to own their real estate, creating an opportunity for industrial REITs to acquire more properties crucial to the industrial sector, such as distribution centers. The rise in online sales has led to an increased demand for warehouse space, while supply chain challenges have prompted industrial companies to lease more space for inventory storage. However, the residential segment is expected to be the fastest-growing segment in the real estate investment trust market forecast period. This is attributed to the increasing demand for REITs, which offer a diversified portfolio of real estate assets and provide consistent income and capital appreciation to investors. Furthermore, the REIT market size has been expanding its product offerings to cater to specific sectors within the real estate industry, such as residential properties. This trend aligns with the growing preference for REITs as a means to invest in real estate without the responsibility of managing or owning the properties directly.
Region-wise, North America dominated the real estate investment trust market in 2022. This is attributed to the fact that the market's composition has changed significantly since the Great Financial Crisis, with alternative property types such as data centers, cold storage facilities, cell towers, and healthcare properties comprising 64% of the U.S. REIT market size by the end of 2022, according to Bloomberg. Furthermore, REITs have demonstrated robust operational performance and are well-equipped to navigate economic uncertainties, including recessions. However, Asia-Pacific is considered to be the fastest-growing region during the forecast period. This is attributed to the increasing market capitalization of REITs in the Asia-Pacific region, coupled with the expansion of the REIT universe and the emergence of new markets embracing REIT concepts, which indicates a positive trajectory for the growth of the sector. As more Asian countries plan to introduce their versions of REITs, global investors will have increased opportunities for investment in the region, further fueling the growth of the Asia-Pacific REIT market.
AI can be used to analyze vast amounts of real estate data, such as property valuations, rental income, occupancy rates, and market trends. By leveraging machine learning algorithms, REITs can gain valuable insights into property performance, identify investment opportunities, and optimize their portfolio allocation strategies. In addition, AI can help automate various aspects of property management, such as lease administration, rent collection, and maintenance scheduling. This automation can lead to cost savings, improved operational efficiency, and enhanced tenant experiences.
Key Findings of the Study
- By type, the equity REITs segment held the largest share in the real estate investment trust market in 2022.
- By application, the industrial segment held the largest share in the real estate investment trustindustry in 2022.
- Region-wise, North America held the largest market share in 2022. However, Asia-Pacific is expected to witness the highest CAGR during the forecast period.
The key players operating in the real estate investment trust market analysis include Prologis, Inc., American Tower Corporation, Crown Castle, Realty Income Corporation, VICI Properties, Digital Realty Trust, Alexandria Real Estate Equities, Inc., Link Real Estate Investment Trust, Essex Property Trust, and SEGRO. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.
