China Securities Co., Ltd. (China Securities) released a research report stating that the latest announcements from the National Development and Reform Commission (NDRC) and the China Securities Regulatory Commission (CSRC) have expanded the asset types of public REITs, adding a new category for "commercial property REITs." Traditional commercial real estate assets such as hotels and office buildings are now explicitly included, which will help revitalize existing commercial assets, alleviate liquidity pressures for property developers and local state-owned enterprises holding quality commercial properties, and support the new development model for real estate.
Currently, the performance of already-issued consumer infrastructure REITs has been stable, making it the best-performing sector since listing, with gains reaching 44.6%. Against the backdrop of an "asset shortage," China Securities remains optimistic about commercial real estate's ability to demonstrate resilient operational performance due to its scarce management capabilities, potentially leading to independent market trends.
Key developments include: 1) On the 27th, the NDRC announced it is actively promoting the expansion of infrastructure REITs to more sectors and asset types, such as urban renewal facilities, hotels, sports venues, and commercial office spaces. 2) On the 28th, the CSRC drafted the "Announcement on the Pilot Launch of Commercial Property Investment Trust Funds (Draft for Comments)" (referred to as the "Announcement").
China Securities' key takeaways are as follows: The "Announcement" consists of eight articles, defining commercial property REITs and specifying requirements for fund registration, operations management, accountability, and regulatory responsibilities. It clarifies that commercial property REITs are closed-end public funds that invest in commercial property-backed securities to acquire ownership or operational rights, generating stable cash flows such as rent and fees, and distributing returns to fund shareholders.
Regarding registration and operations, the "Announcement" outlines requirements for fund managers, custodians, due diligence, application materials, and commercial property standards, while emphasizing active management responsibilities for fund managers. It also strengthens accountability, requiring strict compliance with professional standards and regulatory requirements. Regulatory duties are clearly assigned to relevant authorities for oversight and risk monitoring.
Notably, the commercial property REITs proposed in the "Announcement" are not a new asset securitization product category but fall under the existing public REITs framework, alongside already-issued consumer infrastructure REITs.
The launch of the commercial property REITs pilot marks a milestone in expanding the underlying asset classes for C-REITs. Globally, mature markets include commercial complexes, retail properties, offices, and hotels in their REIT portfolios. China's vast stock of commercial real estate presents strong demand for revitalization through REITs and broadening equity financing channels.
This year, public REIT projects such as IDC and natural gas power generation have been listed, while the first tunnel REIT—Orient Red Tunnel Intelligent Highway REIT—has been accepted for review. Other sectors like cultural tourism are also in the approval pipeline.
Commercial property REITs show promising prospects, with potential acceleration in approvals. Consumer infrastructure REITs have performed well, with the sector rising 44.6% since listing and 31.2% year-to-date as of November 28, 2025. Given their management-driven nature, China Securities remains bullish on the resilience of commercial assets.
Historically, REIT policies were primarily issued by the NDRC, but the CSRC's leadership in this "Announcement" suggests faster approvals for commercial property REITs. With supportive policies and favorable supply-demand dynamics amid an "asset shortage," China Securities maintains a positive outlook for the REIT market in late 2025 and throughout 2026.
Investment recommendations focus on three themes: 1) Cyclically resilient sectors: consumer, policy-backed rental housing, data centers, and municipal environmental protection. 2) Marginally recovering sectors: warehousing and logistics benefiting from regional growth, and highways with improving traffic volumes. 3) High-quality reserve assets with strong expansion demand from original rights holders.
Risk warnings: 1) Approval and issuance delays due to project quality, regulatory speed, or weak market conditions. 2) Policy implementation delays, as China's REIT legislation, taxation, and disclosure frameworks are still evolving. 3) Secondary market volatility, as REITs carry moderate risk-return profiles. Recent corrections stem from post-pandemic operational underperformance and homogeneous investor behavior.
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