China Securities Co., Ltd. released a research report noting that 81 REITs disclosed their second-quarter 2026 reports. Newer projects achieved an overall performance rate exceeding 100%, while existing projects showed stable performance overall with ongoing divergence across asset types. For the 65 existing REITs analyzed, revenue, EBITDA, and distributable funds increased by 3.0%, 1.7%, and 2.0% year-on-year respectively, though profitability and distributions declined quarter-on-quarter.

By asset type, rental housing properties maintained stable operations and benefited from consolidation through capital raising. Consumption properties showed resilience during the off-season, with some high-quality projects continuing to demonstrate growth potential. Industrial parks and warehousing logistics faced continued pressure on rents and occupancy rates. Expressway operations were generally stable but showed divergent project performance. The energy sector was impacted by resource volatility and price pressures on some new energy electricity, with subsidy collections supporting distributions.

Key points from the report:

Overview: Newer projects exceeded overall performance rates above 100%, while existing projects maintained stable performance with continued divergence across asset types.

Regarding achievement rates, 16 newer REITs were selected to calculate performance rates. Overall, their second-quarter 2026 revenue, EBITDA, and distributable funds achieved average rates of 109.8%, 114.5%, and 113.9%, surpassing expectations. In terms of performance comparisons, the overall performance of 65 existing REITs in the second quarter remained stable. The rental housing segment continued high growth, while industrial parks and warehousing logistics remained under pressure. Overall, revenue, EBITDA, and distributable funds showed average year-on-year changes of 3.0%, 1.7%, and 2.0%, maintaining modest growth.

Divergence across asset types: Rental housing and consumption showed resilience, while industrial parks and warehousing logistics remained under pressure. Transportation and energy projects performed divergently.

Industrial parks: Performance declined year-on-year, with divergence in occupancy rates intensifying and rents still in a bottom-finding phase.

Warehousing logistics: Rent pressures dragged down performance, though some projects saw marginal recovery in occupancy rates.

Rental housing: Occupancy rates remained high, rents were stable with slight increases, and capital raising drove sector growth.

Consumption: Off-season did not change operational resilience, with revenue and profitability maintaining year-on-year growth.

Data centers: Revenue and profitability continued to exceed expectations, supported by high charge rates and high occupancy rates.

Transportation: Operations were generally stable, with divergent project performance. Cash flow timing amplified distribution volatility.

Municipal services: Essential demand supported stable operations, while hydrological, seasonal factors, and collection rhythms led to performance divergence.

Energy: Natural resource volatility and electricity price declines dragged down operations, while subsidy collection rhythms supported distributions.

Investment recommendations: The REIT market is expected to stabilize and recover in the second half of the year. In the primary market, select targets with reasonable valuations. In the secondary market, seize opportunities from improving supply-demand dynamics.

For primary market new issuance and strategic allocation strategies, focus on targets with careful valuations and inquiry processes. For the secondary market, focus on three main themes: first, stable anti-cyclical sectors with robust fundamentals, including consumption, policy-oriented rental housing, municipal environmental protection, and energy sectors such as hydropower and thermal power with stronger stability. Second, high-growth sectors aligned with national strategies, covering data centers, high-quality warehousing logistics, and expressway projects with recovering traffic volumes. Third, targets where original sponsors have strong capital raising demands and hold high-quality reserve assets.

Risk analysis:

Risk that approval and issuance progress falls short of expectations.

Risk that policy rollouts fall short of expectations.

Risk of secondary market volatility.