China’s publicly listed real estate investment trust market is showing signs of fatigue as a growing pipeline of new offerings meets weaker investor demand. The REIT market, introduced in 2021 as a mechanism to mobilize private capital for infrastructure and property assets, has expanded to about $33 billion but is now facing pressure from increasing supply and deteriorating market performance.

Around 30 REIT products are currently awaiting regulatory approval to raise a combined 90.4 billion yuan, equivalent to about $13.5 billion, while another 3.9 billion yuan of issuance is expected in the coming weeks. The pipeline represents roughly 40 percent of the value of the 89 products currently listed, raising concerns about whether investor demand can absorb the additional supply.

Two new REIT offerings are scheduled to begin fundraising next week. The Yinhua Yuehai Water Resources fund is seeking to raise as much as $255 million, while the Huatai Zijin Huazhu Anzhu fund is targeting about $196 million. New World Development has also applied to spin off a Shanghai commercial building into a REIT, subject to regulatory approval.

The weaker demand comes as returns from existing REITs have fallen short of investor expectations. Chinese REITs have declined by a weighted average of 10.4 percent over the past six months, while only around half of the products launched this year were trading above their listing prices. Oversubscription levels have also fallen by about half from a year earlier, while a China Securities Index gauge of REIT products remains 28 percent below its 2022 peak.

The decline reflects broader weakness in the underlying property and infrastructure assets. Some REITs have reported weaker rental income, lower occupancy and increasing competition. An E Fund product linked to an industrial zone in Guangzhou, for example, has fallen more than 50 percent since its 2024 listing, while the underlying asset reported financial losses and continued pressure on tenants.

China has been expanding the REIT market as part of efforts to diversify funding sources for infrastructure and property projects. The products allow asset owners, including state-owned enterprises and local government financing vehicles, to recycle capital tied up in infrastructure assets and use the proceeds for new investment. The framework has also been expanded to cover areas including rental housing, shopping malls, hotels and other commercial properties.

However, the increase in issuance is occurring alongside weaker secondary-market activity. Chinese market data reported in September showed the REIT market’s trading activity had declined, while the CSI REIT Total Return Index was down 7.2 percent for the year through September 11. The combination of weaker trading and continued issuance has increased focus on whether sufficient capital is available to absorb new products.

The developments highlight a broader challenge for China’s property and local-government financing system. Beijing has increasingly used REITs to shift part of the funding burden from local governments toward capital markets, but weaker underlying asset performance and cautious investors could limit the effectiveness of the mechanism.