Friday, July 13, 2012

Reits likely to stay as outperformers


Business Times: Fri, Jul 13

SINGAPORE-listed real estate investment trusts (Reits), especially those from the office and industrial (logistics) sector, are likely to remain in the good books of investors over the next few months.

John Stinson, managing director of Cushman & Wakefield's Asia-Pacific capital markets division, said that falling rentals in Singapore's core central business district (CBD) aren't all bad, and should be seen as a window of opportunity for office Reits.

"Rental peaks usually surpass the last peak in a new cycle . . . and it seems Raffles Place rents have a long way more to go," he noted.

For instance, average gross rents in the City Hall area over the past five years are around $10 per square foot. When compared with a high of $15.73 over the past decade, there is around 60 per cent more room for revenue growth.

Office Reits are also the most undervalued asset relative to its peers and offer the greatest discount to net asset value (NAV), making the sector even more compelling.

"Office is certainly a sector to watch both here and in other gateway cities throughout Asia, and it will grow in the medium to long term in Singapore," he said.

Also looking attractive are industrial Reits with a logistics focus because of their growth prospects, said the property veteran.

"Last year in Singapore, we were the highest volume market globally for the amount of money that was put into logistics - which was partly caused by Singapore's very strong shipping hub . . . As such, I see the logistics and industrial market in Singapore seeing considerable growth over the next 12 months."

For the Reit sector as a whole, things are likely to continue to look rosy.

"As long as we continue to have volatility, we will continue to have fairly strong performance from the Reits . . . It is a resilient market sector as you can buy and sell a share or unit in a Reit in matter of seconds; whereas in buying and selling a property, it can take months or years," said Mr Stinson.


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