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Under-REITed: This sub-sector may be the most capable to withstand blistering headwinds
It isn’t bulletproof though, say analysts.
It’s no secret that Singapore’s REITs are facing ferocious headwinds which send chills to the spines of investors, headlined by declining occupancies, weaker rent reversions, and an unfillable surge of supply.
Some subsectors may be in a better position to weather these storms though, and analysts from Maybank Kim Eng cited Industrial REITs as a sector capable of bending through the wind.
“Compounding weak demand is strong supply from 2016-18 for all sub-sectors: 2.0x historical demand for retail, 1.4x office, and 1.2x industrial, making industrial the cleanest dirty shirt,” said a report by Maybank Kim Eng.
Maybank Kim Eng adds that the supply glut may have minimal effect on industrial REITs, while occupancy and rent reversions are also expected to be easier than for retail and office REITs.
“Occupancy and rent reversions to be more challenging for retail and office than for industrial. Industrial REITs have had the best results 9M15. Industrials have priced in downside; not retail Valuations suggest that industrial SREITs have priced in the most downside as Areit and MINT are trading slightly below their target yields while AAREIT and Cache are above,” Maybank Kim Eng said.
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