Singapore Property Analyst

Anni Kum

Thematic (Sector/Industry)

Singapore Equity real estate investment trusts (reits) / Thematic (Sector/Industry)

Singapore REITs (S-REITs) are up about 13% year-to-date in 2019 on a total returns basis against the Straits Times Index’s (STI) 8.3%. S-REITs is expected to continue its outperformance on the back of a pause in the US interest rate hike cycle, falling Singapore government bond yields, and improving demand and supply dynamics in the underlying sub-markets. Valuations of many S-REITs, however, may be appearing stretched as S-REITs’ yields have compressed significantly in the last six months, leaving the yield spread over the 10-year Singapore government bond yield at about 350 basis points, which is lower than the historical average spread of about 370 basis points.Contrary to the popular belief that retail malls are no longer relevant, we view the outlook of the retail space market as positive due to the limited new supply from 2020 and new trend towards omnichannel retailing.  Our preference remains on selected retail REITs with exposure to suburban malls such as <a href="https://www.smartkarma.com/entities/2870" target="_blank" data-smartkarma-citation="entities:2870:1">Frasers Centrepoint Trust (FCT SP)</a> .Office REITs are given more legs to run with the new CBD incentive scheme in the URA Draft Master Plan 2019. The sustained office upcycle may also spill over to the business parks and hi-specs industrial space, benefiting some of the business parks/industrial REITs.We prefer selected industrial REITs with a diversified geographical exposure such as <a href="https://www.smartkarma.com/entities/16035" target="_blank" data-smartkarma-citation="entities:16035:1">Mapletree Logistics Trust (MLT SP)</a> and those with greater exposure to business parks and high-specs industrial space.Referring to our earlier report <a href="https://www.smartkarma.com/insights/singapore-reit-preferred-picks-2019" target="_blank" data-smartkarma-citation="insights:26908">Singapore REIT - Preferred Picks 2019</a> , two of our preferred picks, Mapletree Logistics Trust and <a href="https://www.smartkarma.com/entities/5127" target="_blank" data-smartkarma-citation="entities:5127:1">Mapletree Greater China Commercial Trust (MAGIC SP)</a> (now known as Mapletree North Asia Commercial Trust), were among the top five S-REITs performers year-to-date, having achieved the same total return of 17.6%. <a href="https://www.smartkarma.com/entities/567" target="_blank" data-smartkarma-citation="entities:567:1">Manulife Us Reit (MUST SP)</a> and <a href="https://www.smartkarma.com/entities/2870" target="_blank" data-smartkarma-citation="entities:2870:1">Frasers Centrepoint Trust (FCT SP)</a>, also did well, beating the STI with total returns of 10.4% and 9.5%, respectively.

Singapore REITs (S-REITs) are up about 13% year-to-date in 2019 on a total returns basis against the Straits Times Index’s (STI) 8.3%. S-REITs is expected to continue its outperformance on the back of a pause in the US interest rate hike cycle, falling Singapore government bond yields, and improving demand and supply dynamics in the underlying sub-markets. Valuations of many S-REITs, however, may be appearing stretched as S-REITs’ yields have compressed significantly in the last six months, leaving the yield spread over the 10-year Singapore government bond yield at about 350 basis points, which is lower than the historical average spread of about 370 basis points.Contrary to the popular belief that retail malls are no longer relevant, we view the outlook of the retail space market as positive due to the limited new supply from 2020 and new trend towards omnichannel retailing.  Our preference remains on selected retail REITs with exposure to suburban malls such as Frasers Centrepoint Trust (FCT SP) .Office REITs are given more legs to run with the new CBD incentive scheme in the URA Draft Master Plan 2019. The sustained office upcycle may also spill over to the business parks and hi-specs industrial space, benefiting some of the business parks/industrial REITs.We prefer selected industrial REITs with a diversified geographical exposure such as Mapletree Logistics Trust (MLT SP) and those with greater exposure to business parks and high-specs industrial space.Referring to our earlier report Singapore REIT - Preferred Picks 2019 , two of our preferred picks, Mapletree Logistics Trust and Mapletree Greater China Commercial Trust (MAGIC SP) (now known as Mapletree North Asia Commercial Trust), were among the top five S-REITs performers year-to-date, having achieved the same total return of 17.6%. Manulife Us Reit (MUST SP) and Frasers Centrepoint Trust (FCT SP), also did well, beating the STI with total returns of 10.4% and 9.5%, respectively.

Capitaland Integrated Commercial Trust (CICT SP)

Mapletree North Asia Commercial Trust (MAGIC SP)

Frasers Logistics & Commercial Trust (FLT SP)

Singapore REIT - The Draft Master Plan 2019 Boost and Q1 Scorecard