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Singapore real estate investment trusts (S-REITs) are expected to remain sought-after by investors as their dividend yields of about 5.8 percent surpasses those offered by REITs in other major markets like Australia and Hong Kong, reported Nikkei Asian Review.
“We believe investor attention would now turn to REITs, which are likely to benefit from the current economic growth cycle and deliver DPU growth,” said RHB Securities in a report.
In particular, the brokerage expects REITs that own hotels and industrial properties to raise their distribution per unit (DPU) in 2018 thanks to a rebound in Singapore’s trade and tourism sectors. Another factor is the tapering of new supply of hotels and industrial properties.
RHB Securities expects hotel room rates to recover by three percent to seven percent next year after slumping by about 12 percent from its peak in 2012.
Next year, the number of tourists coming here is projected to grow by 4.7 percent. However, the estimated supply of new hotel rooms is forecasted to increase marginally by 1.7 percent and 1.9 percent in 2018 and 2019 respectively, down from this year’s four percent growth.
“We expect hoteliers to regain some of the pricing power,” noted RHB, adding that its top picks for this segment include OUE Hospitality Trust and CDL Hospitality Trust.
The brokerage is also bullish on the prospects of industrial REITs, as the pipeline of warehouses and factories is estimated to hit 2.1 percent next year and decline sharply thereafter.
Another factor is the strong manufacturing and exports in 2016. If this continues, industrial trusts like Ascendas REIT could post higher rents by 2018.
Furthermore, the demand for business park space is expected to remain robust, as only 400,000 sq ft of new supply will enter the market next year versus the 10-year average supply of 1.4 million sq ft per annum.
This article was edited by Keshia Faculin.
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