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Real estate investment trusts (Reits) in Singapore that focus on industrial properties are expected to benefit from the government’s policy on promoting more lucrative businesses, reported The Straits Times, citing a report from Maybank Kim Eng.
It revealed that the shift towards these new enterprises will lead to a more vibrant Reit sector, as the new economy is anticipated to sharply increase the demand for hi-specs factories and business park space, as well as reduce the existing supply glut of industrial properties.
“Supply surplus, which has plagued sector dynamics, should abate in 2018 as demand looks set to exceed new completions,” said Chua Su Tye, an analyst at Maybank Kim Eng.
He believes that rents of industrial properties will hit rock-bottom this year and rebound by 2018 thanks to the brighter prospects of the manufacturing industry.
“Singapore’s economic remodelling efforts should steer industrial demand needs towards hi-specs factories and business parks,” noted Chua, referring to the government’s focus on new sectors like data centres, e-commerce and technology R&D, instead of traditional manufacturing.
He noted that the appetite for hi-specs factory and business park space has already exceeded total industrial demand, with the latter offering the most robust demand/supply balance. In fact, Chua estimates that their rental earnings accounted for 25.3 percent of the sector total in 2016 compared to just 4.8 percent in 2003.
In general, Chua believes that industrial Reits are “well-cushioned” against rising interest rates, as many have implemented measure to lower their leverages and extend their loan maturities. But those with visible growth drivers and strong balance sheets are expected to outperform their peers.
Specifically, Ascendas Reit is Maybank’s top pick due to its “strongest fundamentals”, as its portfolio of hi-specs factories and business parks would best capitalise on the pro-growth economic programmes introduced by the government.
It also recommended investing in Mapletree Industrial Trust stocks due to its Singapore-focused industrial portfolio, and likewise for Viva Industrial Trust, which owns two large business parks.
This article was edited by Denise Djong.
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