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Real Estate Investment Trusts (REITS) – A Darling in the Singapore Stock Exchange

In this article, we shine the spotlight on the Retail segment in Singapore, which has been the leading business segment in Singapore over the last 3 years.  It offers investors the opportunity to invest in a professionally managed portfolio of real-estate, through the purchase of a publicly-traded equity investment product. 

Retail REITs Performance and Major Players
Retail REITs comprises of properties like shopping centres, malls and other premises that are meant for retail activities. They form the largest sub-segment by capitalization on the Singapore Exchange and have been the strongest performers in the last 3 years, with an average of 36.7% total returns. It also maintains the lowest average debt to asset ratios among the 5 sub-industry within the segment 

Outlook of Retail REITs in Singapore
Despite the boom of e-commerce, Amazon’s recent entrance into Singapore, and increasing retail space vacancy, property analysts noted that there is still a silver lining for this sector. 

Although new retail space supply (258,000 sqm) is set to rise by 2018 which may add pressure on rental, it should be highlighted that the new supplies are mostly located in the suburban areas. This follows the government’s push towards a live, work and play concept in the heartlands. Many online retailers, are starting to complement their online presence with a brick-and-mortar store within heartland malls that will increase demand for retail space and improve rents. Additionally, many shoppers still visit the heartland malls for essential services like grocery shopping and haircuts. 

Over the past decade, there has also been a prominent change in tenant mix within shopping malls. Enrichment centres for children have been sprouting widely as compared to that 10-15 years ago. We are also seeing new concepts such as ‘escape rooms’ and ‘laser tag games’ entering the market, providing customers with an experiential experience which cannot be replaced by e-commerce. Therefore, portfolios with sub-urban malls and unique retail concepts tend to be more resilient and can be considered for investment. 

 

 

 

Robin Chin

Robin Chin

Partner, Foo Kon Tan
Singapore

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