The commercial real estate public REITs market has recently achieved two notable milestones. China Merchants Property Operation Service announced that its commercial real estate REIT application, submitted jointly with its controlling shareholder China Merchants Shekou, received regulatory approval from the CSRC on September 20, with the Shenzhen Stock Exchange issuing corresponding listing approval. On September 19, the GF New World Closed-End Commercial Real Estate Securities Investment Fund was updated to "accepted" status, marking the first commercial real estate REIT led by a Hong Kong-based entity.
Data from DTZ shows that as of September 20, 2026, the Shanghai and Shenzhen exchanges have cumulatively accepted 30 commercial real estate REIT product filings, with projected total fundraising exceeding 95 billion yuan. Currently, 5 REITs have been listed, collectively raising approximately 23.2 billion yuan, with issuance premiums ranging between 6% and 10%.
Looking back at the development trajectory of public REITs, early products primarily focused on infrastructure assets such as industrial parks, affordable rental housing, and transportation energy. After the commercial real estate REIT pilot program was implemented, the asset class expanded to include operational commercial properties like shopping malls, office buildings, hotels, and outlet centers, filling an important gap in real estate equity financing. Moreover, the GF New World Commercial Real Estate REIT being led by Hong Kong-based New World Development Company signals that the REIT market is attracting a more diverse range of participants.
Commercial real estate REITs are now activating the value of existing assets and reshaping the industry's operating logic. For years, commercial real estate has struggled with substantial capital lock-up and slow asset turnover. Holding commercial properties such as shopping malls and office buildings ties up significant capital, continuously raising corporate leverage ratios. Combined with asset depreciation caused by market downturns, developers have limited liquidation channels, exacerbating their financial strain.
As an equity-based tool, commercial real estate REITs provide companies with an exit pathway for existing assets. By placing mature commercial assets with stable rental income into REITs, companies can recover capital and optimize their balance sheets. The more profound shift lies in how this tool is transforming the industry's underlying business model. Asset values are no longer tied to land appreciation expectations but are instead determined by real operational metrics such as occupancy rates, rental levels, and property management capabilities. Corporate financing is also moving from entity credit to asset credit, where the cash flow of the asset itself replaces the corporate guarantee.
This transformation is also pushing developers to pivot from pure construction and development toward asset operation and management, building a business matrix that balances both heavyweight and lightweight operations. Recovered funds can be used for renovation and upgrades of existing properties, or directed toward urban renewal and affordable housing projects, creating a virtuous capital cycle and reducing the industry's reliance on traditional credit financing. According to Zhongtai Securities, the potential activation space for commercial real estate REITs ranges from 800 billion to 1.5 trillion yuan.
Compared to this scale, the current penetration rate of commercial real estate REITs remains very low, indicating the market is still in its early stages with significant growth potential ahead. As issuance becomes more regular, high-quality assets with sustainable operational capacity are expected to enter the filing pipeline sequentially. However, expansion does not mean unrestrained access. Commercial real estate REITs maintain strict standards for underlying asset cash flow, operational stability, and ownership clarity.
Yet it is equally important to recognize that unlocking more existing asset filing space requires addressing the constraint of land tenure expiration on underlying assets. For instance, commercial land has a statutory transfer period of only 40 years, which after deducting development and construction time leaves a significantly shortened remaining period. Assets with shorter remaining land tenure are valued lower with correspondingly higher cap rates, which is one reason why some high-quality assets fail to meet REIT listing conditions.
Fortunately, several regions are already implementing policy support to extend income periods for shorter-tenure assets. This enables high-quality assets with renewal economic value, determined by the difference between new valuations and land renewal costs, to combine renewal with REIT issuance and realize asset appreciation. Looking ahead, as the institutional framework continues to improve, commercial real estate REITs are expected to consistently serve as a capital bridge, enabling more quality existing assets to achieve professional long-term operation and steering the real estate industry toward a new phase of high-quality development.
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