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Ratings agency Fitch expects the Singapore industrial real estate investment trust (REIT) sector to remain resilient in the face of the current economic slowdown primarily due to their robust financial profiles.
“We expect rental rates on Singapore industrial property to remain under pressure in Q3 2015, as falling demand meets increasing supply across all industrial asset types,” it said in a release.
“There is more pressure on rents of lower-specification industrial properties because of weaker demand and higher supply, while higher-specification properties are less affected as demand remains stable.”
Fitch noted that REITs with a greater proportion of low-specification assets and a higher proportion of near-term lease renewals are at higher risk.
Nonetheless, the loan-to-value ratio, and interest coverage ratio of the sector remain robust.
“The large proportion (80 percent at end-1H 2015) of the sector’s debt with fixed rates, as well as the narrow mismatch between the duration of the sector’s lease and debt contracts, also underpin the sector’s resilience in a downturn,” said Fitch.
Image: Industrial buildings at the International Business Park in Jurong. (File Photo)
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
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