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Meanwhile, retail REITs witnessed lower tenant sales even as shopper traffic increased.
Driven by higher contributions from earlier acquisitions, industrial real estate investment trusts (REITs) registered the strongest net property income growth at 5-101% in the third quarter of 2019, reported Singapore Business Review citing Maybank Kim Eng.
Ascendas REIT, for instance, saw its NPI increase 12% year-on-year following the completion of two UK deals in 2H 2018. ESR-REIT’s NPI also doubled after its acquisition of 15 Greenwich Drive and the addition of nine properties from Viva Industrial Trust following the merger.
Pushing for overseas diversification, industrial REITs also emerged as the most active in deals, with overseas assets under management (AUMs) at 24-69% of the total from 9-67%.
“Overseas assets are mostly freehold and should continue to strengthen S-REITs’ overall AUM growth, with their relatively longer WALEs and leases embedded by annual rental escalations supporting DPU visibility,” noted Chua Su Tye, analyst at Maybank Kim Eng.
However, industrial REITs are expected to witness easing supply and stabilising rents. In Q3 2019, the JTC all-industrial rental index inched up by 0.1% only, while supply is forecasted to ease to 1.7% per annum for 2019 to 2021 from 3.3% in 2014 to 2018.
“Leasing activity was largely due to renewals and relocations as tenants continued to rightsize or consolidate, while holding back their expansion given uncertain macros, suggesting a slower recovery in rents,” said Chua.
Meanwhile, retail REITs witnessed lower tenant sales even as shopper traffic increased 1-9% year-on-year. Only prime Orchard Road malls, such as Wisma Atria, experienced an improvement in tenant sales primarily from a lower base.
Nonetheless, retail REITs recorded better DPU growth in Q3 2019, with CapitaLand Mall Trust leading the pack at 4.8% year-on-year due to higher contributions from Funan and Westgate. Chua expects REIT-owned malls to outperform the broader market both in rents and occupancies.
And while Hospitality REITs lagged in earnings during the period under review, Singapore’s revenue per available room (RevPAR) showed signs of recovery with Frasers Hospitality Trust and CDL Hospitality Trusts registering RevPAR growth of 4.9% year-on-year.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
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