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Distribution per unit (DPU) of Singapore real estate investment trusts (S-REITs) are expected to edge up by one to two percent in 2018 to 2019, reported Singapore Business Review.
According to DBS Equity Research, the forecasted rise in DPU comes after these trusts amassed $4 billion in funding over the first five months of the year, with most proceeds used for acquisitions. The amount, which excludes IPOs, is among the highest raised by S-REITs since 2011.
However, the S-REIT index has fallen 2.4 percent since April, partially due to investors pricing in the effect of four interest rate hikes and the rotation among different S-REITs amidst the robust demand recorded during the recent fundraisings.
“Looking ahead, whilst the timing of further fundraisings is hard to predict, we believe the majority of the large equity raisings are likely behind us,” said DBS analyst Mervin Song.
“With nascent signs of a sustainable recovery in the Singapore property market boosted by an inorganic strategy, in our view, should result in S-REITs rallying with yield spreads compressing to 3.0 percent from 3.4 percent currently.”
Despite the contraction in their yields, several real estate segments are on the road to recovery, he noted. In particular, rents of Grade A office space in the Central Business District (CBD) have increased by three percent quarter-on-quarter and eight percent on an annual basis.
“Leading the way is the office sector with Grade A CBD office rents rising faster than expected to $9.70 psf per month and close to our year-end target of $10 psf per month.”
Similarly, the retail sector is showing “green shoots” due to a rebound in shop sales, with CapitaLand Mall Trust posting positive rental reversions in over a year.
“Finally, hotels in Singapore are reporting a year-on-year increase in revenue per available room (RevPAR) for the first time in over two years,” added Song.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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