Ping An Securities: Consumer REITs expand capacity, improve quality, and operate steadily, and perform well

The Zhitong Finance App learned that Ping An Securities released a research report saying that since the beginning of the year, China Securities REITs had the highest increase in the overall income index. Among them, consumer infrastructure REITs had the highest increase, and consumer infrastructure REITs had the highest increase. It was mainly due to good operation of underlying assets, steady and attractive dividends in a low interest rate environment, compounded by domestic trade-in and other consumer policy catalysts and expectations for expanding domestic demand, etc., which are highly sought after by investors. Also, it is worth noting that Huaxia China Resources Commercial REIT announced the launch of an expansion plan (to acquire the Suzhou Kunshan Wanxianghui Project) to expand for the first time for a domestic consumer public offering REIT, marking that consumer REITs have entered the “stock+incremental” two-wheel drive stage.

Ping An Securities's main views are as follows:

Consumer infrastructure REITs had the highest increase, benefiting from both fundamentals and policy expectations

Since the beginning of the year, the China Stock Exchange REITs full income index has ranked high among major asset classes. Among them, consumer infrastructure REITs had the highest increase, mainly due to good operation of underlying assets, steady and attractive dividends in a low interest rate environment, compounded by domestic trade-in and other consumer policy catalysts and expectations for expanding domestic demand, etc., which are highly sought after by investors. The implementation of consumer promotion policies has shown results. Since 2024Q4, Social Zero's cumulative year-on-year growth rate and consumer confidence index have all rebounded.

Consumer Infrastructure REITs 2024 Report shows that underlying asset business conditions are stable and improving

The underlying assets of consumer REITs are shopping malls, supermarkets, farmers' markets, etc. that focus on mass consumption. People's livelihood attributes and consumption resilience are strong. The occupancy rate and collection rate remained high in 2024. Of the 7 consumer REITs for which data is available, 4 have exceeded the annual forecast.

Judging from the rent unit price level and the 2024 rent increase, Huaxia China Resources Commercial REIT and Huaxia Joy City Commercial REIT performed better, accounting for a relatively low share of the main store area, reflecting that the overall comprehensive operation of the shopping mall is better, there is no need to rely too much on the drainage of main stores, and it also frees up more room for the shopping center to adjust operations, making it easy to flexibly adjust the brand portfolio and enhance overall rental income. Huaxia pioneered Ole REIT and Huaxia Huaxia Huarun Commercial REIT have a shorter remaining lease period, which may mean that subsequent rent adjustments are more flexible and have more potential for rent growth.

Judging from the floating management fees extracted by asset management agencies, Huaxia China Resources Commercial REIT Management Agency, as a mature commercial management operator, is far ahead in extracting floating management fees. In 2024, it has already exceeded 100 million yuan. Furthermore, compared to the issuance valuation, Huaxia Pioneer Ole REIT, Jiaxia Wumei Consumer REIT, Huaxia Joy City Commercial REIT, and Huaxia China Resources Commercial REIT all increased their 2024 valuations, which are also strongly related to their operating conditions. Judging from the annualized distribution rate of the amount available for distribution, consumer REITs all surpassed the 2024 forecast distribution level in the prospectus, reflecting the “debt-like” characteristics of stable returns.

Domestic consumer REITs plan to enter the “stock+incremental” two-wheel drive stage, with new categories and foreign players entering

Huaxia China Resources Commercial REIT announced the launch of an expansion plan (to acquire the Suzhou Kunshan Wanxianghui Project) to expand the domestic consumer REIT for the first time, marking that consumer REITs have entered the “stock+incremental” two-wheel drive stage. Compared to the addition of Tier 1 and 2 cities and the intensification of commercial competition in stock, due to the relatively stable market size and few competitors, the operating stability of benchmark projects is stronger, and this expansion also provides exploratory significance for this type of commercial exit.

Furthermore, in 2025, consumer infrastructure REITs ushered in a new category of lower-level capital products. The country's first farmers' market public offering REITs (E-Fangda Warwick Farmers' Market REIT) was listed. Its characteristics favor a combination of commercial consumption and warehousing and logistics. Recently, domestic consumer REITs have also introduced foreign players. CapitaMall Investment declared the first foreign consumer REITs in China, compounded by the fact that CapitaMall is rich in reserve resources for expansion. After the fund went public, the growth potential of the fund is worth paying attention to.

Investment advice

Domestic shopping malls have experienced many rounds of development, the stock scale continues to expand, and the competitive pattern is relatively stable; in the era of inventory, shopping center stock project transformation, asset-light export, and in-depth operation trends have increased. High-quality shopping malls have high occupancy rates, stable sales, and long-term investment value. It is recommended to focus on excellent shopping center development and operation companies (such as China Resources Land (01109), Longhu Group (00960), China Resources Vientiane Life (01209), Xingsheng Commercial (06668), etc.) and related consumer infrastructure REITs (such as Huaxia Huarun Commercial REIT, Huaxia Joy City Commercial REIT, Huaxia Pioneer Ole REIT, etc.).

Risk Alerts

1) The growth rate of the domestic economy is declining, and there is a risk that the consumption growth rate will decline sharply; 2) the risk that inventory competition will intensify and the shopping center pattern will deteriorate; 3) the risk that innovation and upgrading of shopping malls will fall short of expectations.