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Rents and demand for properties held by real estate investment trusts (REITs) in the Asia Pacific (APAC) region vary due to different economic growths and supply conditions at each market, according to a report from Standard & Poor’s Ratings Services.
In particular, rents and demand for such properties in Singapore, Australia and Hong Kong are expected to remain flat or slightly sluggish, while those in Japan are forecasted to pick up, said its analyst Craig Parker.
“Nevertheless, we project a stable credit outlook for REITs we rate. The REITs have amassed high-quality portfolios that can withstand economic headwinds better than lesser-quality properties held by their competitors, sustaining their credit quality despite sluggish rental growth,” he explained.
However, the anticipated interest rate hike in the United States over the next two years, could negatively affect these trusts as interest expenses form a key part of their operational costs.
“Still, we expect that rated Asia Pacific REITs can largely shoulder the higher interest burden, noted Parker.
To prepare for the upcoming higher interest rate environment, these institutions are reducing their interest costs and prolonging their loan tenures. Some are also refinancing expensive debt taken out during the 2008 downturn at a lower interest rate, while REIT managers are controlling their borrowings even though they can still loan a significant amount, he added.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this and other stories, email nikki@propertyguru.com.sg
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