The development and initial performance analysis of REITs in Ireland
| Pages | 56-70 |
| DOI | https://doi.org/10.1108/JPIF-08-2019-0114 |
| Date | 12 November 2019 |
| Published date | 12 November 2019 |
| Author | Muhammad Jufri Marzuki,Graeme Newell,Stanley McGreal |
| Subject Matter | Real estate & property,Property management & built environment |
The development and initial
performance analysis of REITs
in Ireland
Muhammad Jufri Marzuki and Graeme Newell
School of Business, Western Sydney University, Parramatta, Australia, and
Stanley McGreal
Department of Built Environment, Ulster University, Belfast, UK
Abstract
Purpose –The inception of REITs in Ireland in 2013 presented an additional property
investment opportunity to Ireland’s commercial property investment landscape. Importantly, the Irish
REIT market is an institutional apparatus with an objective to rejuvenate Ireland’s commercial property
market. The purpose of this paper is to provide an empirical validation of the performance of Irish REITs over
the period March 2015 to February 2019 across several investment measures such as risk-adjusted returns
and diversification benefits.
Design/methodology/approach –Using monthly total returns in loc al currency, the risk-adj usted
performance and portfolio diversification attributes of Irish REITs are assessed. The mean-variance
framework is utilised to a ssess the potential added-value ben efits of Irish REITs in a mixed-asset por tfolio.
Findings –Irish REITs delivered the strongest average annual return performance, lower relative
volatility vs the stock market and competitive overall risk-adjusted performance. The results affirm the
characteristic of Irish REITs as a total return-focussed income-driven property investment asset class.
The optimal asset allocation analysis shows that Irish REITs are an important ingredient in a mixed-asset
investment framework, as their allocation could be scaled effectively across the portfolio
risk-return spectrum.
Practical implications –Irish REITs are an emerging investment opportunity for investors seeking
exposure in the strongly performing property market in Ireland in the post-Global Financial Crisis period.
They are also regarded as an effective alternative conduit to private investment routes (i.e. direct property
and non-listed property funds), with the added advantage of being more liquid and versatile than their private
property investment counterparts. Importantly, Irish REITs fulfilled the purpose for which they were
originally designed. The promising initial performance observed in this paper gives a useful context to what
the future might hold for Irish REITs, given the strong interest for commercial property assets in Ireland from
both local and cross-border property investors.
Originality/value –This paper is the first empirical research aimed at providing an initial empirical
performance validation of Irish REITs as an effective route to commercial property exposure in Ireland. This
research enables empirically validated, more informed and practical property investment decision making
regarding the strategic role of Irish REITs in a portfolio.
Keywords Ireland, REITs, Risk-adjusted returns, Portfolio diversification, NAMA, Asset allocation,
Commercial property
Paper type Research paper
Introduction
Over the last 55 years, REITs have been introduced across 37 countries globally, comprising
794 active property investment vehicles corresponding to $1.5 trillion in total market
capitalisation (EPRA, 2019a). This includes REITs in various European markets, notably
the UK, France, Germany, the Netherlands and Spain.
Being one of the most recently introduced REIT markets in Europe, Irish REITs were
designed with the primary intention of providing a good compromise between liquidity and
effective commercial property investment for a wide range of investors. REITs are regarded
as more liquid and versatile than direct property investment, whilst delivering the fiscally
transparent income streams similar to that of the existing tax efficient non-listed Irish
property funds (formally Irish real estate funds). In 2019, the market now sees four
Journal of Property Investment &
Finance
Vol. 38 No. 1, 2020
pp. 56-70
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-08-2019-0114
Received 23 August 2019
Revised 14 October 2019
Accepted 14 October 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
56
JPIF
38,1
To continue reading
Request your trial