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 local currency, the risk-adjusted performance and portfolio diversification attributes of Irish REITs are assessed. The mean-variance framework is utilised to assess the potential added-value benefits of Irish REITs in a mixed-asset portfolio. 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.
| Language | English |
|---|---|
| Journal | Journal of Property Investment & Finance |
| Early online date | 8 Nov 2019 |
| DOIs | |
| Publication status | E-pub ahead of print - 8 Nov 2019 |
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Keywords
- Asset allocation
- Commercial property
- Ireland
- NAMA
- Portfolio diversification
- REITs
- Risk-adjusted returns
Cite this
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The development and initial performance analysis of REITs in Ireland. / Marzuki, Muhammad Jufri; Newell, Graeme; McGreal, W. Stanley.
In: Journal of Property Investment & Finance, 08.11.2019.Research output: Contribution to journal › Article
TY - JOUR
T1 - The development and initial performance analysis of REITs in Ireland
AU - Marzuki, Muhammad Jufri
AU - Newell, Graeme
AU - McGreal, W. Stanley
N1 - Emerald allows authors to deposit their AAM under the Creative Commons Attribution Non-commercial International Licence 4.0 (CC BY-NC 4.0). To do this, the deposit must clearly state that the AAM is deposited under this licence and that any reuse is allowed in accordance with the terms outlined by the licence. To reuse the AAM for commercial purposes, permission should be sought by contacting permissions@emeraldinsight.com. For the sake of clarity, commercial usage would be considered as, but not limited to: o Copying or downloading AAMs for further distribution for a fee; o Any use of the AAM in conjunction with advertising; o Any use of the AAM by for promotional purposes by for-profit organisations; o Any use that would confer monetary reward, commercial gain or commercial exploitation. Emerald appreciates that some authors may not wish to use the CC BY-NC licence; in this case, you should deposit the AAM and include the copyright line of the published article. Should you have any questions about our licensing policies, please contact permissions@emeraldinsight.com.
PY - 2019/11/8
Y1 - 2019/11/8
N2 - 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 local currency, the risk-adjusted performance and portfolio diversification attributes of Irish REITs are assessed. The mean-variance framework is utilised to assess the potential added-value benefits of Irish REITs in a mixed-asset portfolio. 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.
AB - 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 local currency, the risk-adjusted performance and portfolio diversification attributes of Irish REITs are assessed. The mean-variance framework is utilised to assess the potential added-value benefits of Irish REITs in a mixed-asset portfolio. 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.
KW - Asset allocation
KW - Commercial property
KW - Ireland
KW - NAMA
KW - Portfolio diversification
KW - REITs
KW - Risk-adjusted returns
UR - http://www.scopus.com/inward/record.url?scp=85076460489&partnerID=8YFLogxK
U2 - 10.1108/JPIF-08-2019-0114
DO - 10.1108/JPIF-08-2019-0114
M3 - Article
JO - Journal of Property Investment and Finance
T2 - Journal of Property Investment and Finance
JF - Journal of Property Investment and Finance
SN - 1463-578X
ER -