[Edaily Marketin KIM SUNG-SOO Reporter] Institutional investors are adopting a strategy of using REITs (Real Estate Investment Trusts) to fill “gaps” in their overseas real estate portfolios. Since buying and selling real estate assets worth tens of trillions of won directly takes time, they are using REITs—which allow for a rapid response to market changes—as an intermediary.

Real estate investments are difficult to liquidate once made. Overseas real estate, in particular, involves numerous procedures—from property sourcing to due diligence, financing, contracting, and obtaining permits—making it challenging to immediately incorporate new assets into a portfolio even when investment opportunities arise.

In contrast, REITs allow investors to utilize products traded on public markets, enabling relatively quick investment in specific countries or sectors. This is why institutional investors are turning to REITs as a means to offset the illiquidity of physical real estate.

“Let’s Start with REITs and See How It Goes”… Tactical Asset Allocation

According to the financial investment industry on the 10th, a “tactical asset allocation” strategy—in which institutional investors allocate a portion of their overseas real estate portfolios to REITs—is gaining importance.

Tactical asset allocation (TAA) is an investment strategy that aims to generate additional returns by flexibly adjusting the weighting of assets in response to short-term market conditions or economic outlooks.

Overseas institutional investors in countries such as Australia, Japan, and Singapore often hold approximately 5–10% of their total real estate portfolios in REITs. When sectors with rapidly growing investment demand—such as data centers and hotels—emerge, they invest in REITs first, rather than purchasing physical assets outright.

For example, even if growth in the data center market is anticipated, purchasing an actual data center requires finding a suitable property, negotiating the price, and securing financing. During this process, market conditions may shift, or a good investment opportunity could be missed.

Utilizing REITs can reduce this time lag. This enables a strategy of first securing investment opportunities in a specific country or sector and then linking them to actual physical real estate investments.

In particular, the larger the overseas real estate portfolio—reaching tens of trillions of won—the more effective this approach becomes for major institutions. It allows them to respond flexibly through REITs when investment trends shift in sectors such as office, logistics, residential, and data centers.

National Pension Service Also

Invests in

Global

REITs…

“To Supplement Underrepresented Sectors” The National Pension Service

is also utilizing investments in global REITs.

Their approach differs from simply investing based on whether REITs are undervalued at current interest rate levels. Instead, they focus on using REITs to fill gaps in exposure to specific assets, regions, or sectors within their overall real estate portfolio.

For example, if the proportion of data centers in an existing overseas real estate portfolio is low, the fund can prioritize entry into that market through related REITs. The same applies if the hotel market in a specific country is deemed promising.

From an institutional perspective, this approach offers the advantage of not missing investment opportunities while buying time before making direct investments in physical assets.

Furthermore, REIT investments may not be limited to serving merely as substitutes. If actual real estate investment opportunities arise in a country or sector where an investor has first invested via REITs, the existing REIT assets can be sold and converted back into liquid assets.

In other words, it’s a strategy of “entering via REITs first, then switching to physical real estate.” This effectively compensates for the slow transaction speed of physical real estate with the relative liquidity of REITs.
“Staying Ahead of

Real Estate Trends” with REITs… Investing Swiftly

The Public Officials’ Mutual Aid Association is cited as an institution that actively employs this REIT strategy.

Institutional investors’ perspectives on REITs are also shifting from the past. Previously, REITs were often viewed as financial products similar to stocks, and price volatility was frequently seen as a burden—largely because market prices fluctuate more frequently than those of physical real estate.

However, recently, there has been a growing trend of viewing REITs as a tactical tool to fill gaps in the overall portfolio.

In particular, as investment trends in the real estate market shift rapidly, the utility of REITs is likely to increase further. This is because it is difficult to respond immediately with physical real estate alone when assets that previously held little weight—such as data centers—emerge as new key investment targets, or when the tourism industry in a specific country experiences rapid growth.

From the perspective of institutional investors, it is no longer necessary to pursue every investment opportunity solely through physical real estate. They can enhance their portfolio’s flexibility by securing core assets for long-term holding as physical properties, while using REITs to gain an early foothold in rapidly changing sectors.

An official in the financial investment industry stated, “Even when good investment opportunities are identified in overseas real estate, it takes a considerable amount of time to actually acquire the assets,” adding, “By utilizing REITs, one can first secure exposure to a specific country or sector and then transition to direct real estate investments depending on market conditions, making REITs a useful tool for tactical asset allocation.”