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Earnings growth for the six Singapore-listed office-sector real estate investment trusts’ (REITs) is likely to slow down in 2016, Fitch Ratings reported Wednesday (30 March).
But the ratings agency said the credit profiles of most of the office SREITs are strong, which should help to absorb the impact without any major credit implications.
“We expect the sector’s rental reversions to stay marginally positive in 2016, despite the pressure on Singapore office rents.” said Fitch. “This is because the office SREITs’ exposure is limited, with 20 percent of leases due for renewal in 2016, and because renewing leases were contracted about six years ago on average when rents were considerably lower.
Amid a generally slower economic environment, and weak services sector, rents in Singapore’s central region fell by three percent to six percent in Q3 and Q4 of last year, respectively. According to Fitch, as demand is likely to remain weak, rents are expected to continue to fall, while new office space could increase by up to seven percent.
The ratings agency also expects vacancy rates to rise this year as new supply increases amid a weak demand. “The sector’s credit fundamentals are strong with long-term revenue visibility of six years on average, low leverage and robust funds flow from operations interest cover.”
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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