atans1

Reits: The Ugly and the Good

In Property, Reits on 16/03/2015 at 1:12 pm

If you believe stock brokers:

Industrial

High supply and limited demand are key risks.

The good times may finally be drawing to a close for industrial REITs, after enjoying three consecutive years of double-digit revenue growth.

A report by CIMB stated that industrial REITs have limited room for further positive rental reversions. In the past three years, rental indices for the different types of industrial properties have rebounded to pre-GFC levels on the back of a lack of supply, and strength of the manufacturing production index (MPI) gaining strength.

These two factors will be absent this year, what with the MPI forecasted to only grow from around 1-2% while supply will be high, averaging 7.1m sq ft p.a. for single-user factory space, 5.7m sq ft for multi-user factory space, 5.7m sq ft for warehouses, and 1.7m sq ft for business park space in 2015-2016.

“As such, we believe the room for further positive rental growth could be suppressed. In addition, with passing rents for industrial REITs’ properties mostly marked to market, the lack of decent growth in the headline rents in this sector could limit the room for higher rental rates when leases are due for renewal in the coming quarters,” stated CIMB.

– See more at: http://sbr.com.sg/commercial-property/in-focus/good-times-are-over-industrial-reits#sthash.aCLjlS5M.dpuf

Office

According to BNP Paribas, it may be time to take profit on office REITs as positives have been priced in by the market and new CBD offices are on their way in 2016.

“Office rents should continue to rise in 2015, with an increase of 10% y-y in 2015. That said, we believe this has been largely priced in by the market, as reflected in the share-price outperformance of office REITs in 2014. Looking ahead, new CBD offices that are due to come on the market in 2016 could lead to a flurry of leasing activity, starting as early as 2H15. This should cap rental growth in 2016,” stated BNP Paribas.

– See more at: http://sbr.com.sg/commercial-property/news/it-time-take-profit-outperforming-office-reits#sthash.nvdScjBc.dpuf

Retail

According to CIMB, the worst is finally over for these retail REITs. For one, space supply is expected to moderate this year peaking in 2014. Around 2.6m square feet of space flooded the market last year, more than twice the 3 -year historical average net take-up of 1.1m sq ft.

“We expect supply to moderate, averaging about 700k sq ft annually in 2015-2018. Additionally, we believe Singapore is not “over-malled” vs. other Asian cities and historically,” stated CIMB.

– See more at: http://sbr.com.sg/commercial-property/news/retail-reits-in-rebound-after-extremely-bleak-2014#sthash.8BhDMwSt.dpuf

Advertisements
  1. REITs with high gearing and large amounts of loans due 1-2 yrs will be whacked & diluted by any downturn. Other than that, no worries man.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: