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Monday, July 8, 2019

Three Best-Performing Singapore Office REITs Returned 28% in YTD

02 Jul 2019 | Category: Market Updates
REITsREITs

Singapore REITs was the top net buy sector in 6M2019, drawing net institutional inflows of S$396.3 million over the period. In June, S-REITs was the top net buy sector, attracting inflows of S$223.1 million, with CapitaLand Commercial Trust topping the net buy list.

Of the 34 REITs listed on SGX, 10 are engaged in the acquisition, development, ownership, leasing, management and operation of office properties located in Asia-Pacific, Europe and the US. These 10 office REITs have a market cap of more than S$30 billion.

Among the 10 commercial REITs, six own Singapore office assets. In Jan-June 2019, the three best performers among the six were: Mapletree Commercial Trust (+29.9%), CapitaLand Commercial Trust (+26.9%) and Frasers Commercial Trust (+26.0%). The trio averaged a YTD total return of 27.6%.

Singapore Exchange lists 34 REITs, seven stapled trusts and three property trusts with a combined market cap of over S$100 billion. Two stapled trusts – ARA US Hospitality Trust and Eagle Hospitality Trust – listed on SGX in May.

Singapore REITs was the top net buy sector in the first six months of 2019, drawing net institutional inflows of S$396.3 million over the period. S-REITs was the top net buy sector in June, after being May’s second top net buy sector. CapitaLand Commercial Trust topped the institutional net buy list in June, drawing inflows of S$58.6 million.



Source: SGX data

Of the 34 REITs on SGX, 10 are engaged in the acquisition, development, ownership, leasing, management and operation of office properties, located in Singapore, Malaysia, South Korea, Australia, Europe, and the United States. These 10 commercial/office REITs have a combined market cap of more than S$30 billion. Among them, Mapletree Commercial Trust and Suntec REIT also have retail assets in their portfolios.

Among them are six REITs with Singapore office assets: CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT, Keppel REIT, Frasers Commercial Trust and OUE Commercial REIT. Over January-June 2019, the three best performers among the six were: Mapletree Commercial Trust (+29.9%), CapitaLand Commercial Trust (+26.9%) and Frasers Commercial Trust (+26.0%). The trio averaged a YTD total return of 27.6% and a 12-month dividend indicated yield of 4.7%.

The table below details the six REITs with Singapore office assets, sorted by YTD total return.



Name SGX Code  Market Cap (S$M) Total Return YTD (%) Total Return 1Y (%) Total Return 3Y (%) 12M Div Ind Yld (%) P/B (x)

MAPLETREE COMMERCIAL TRUST*  N2IU 5,963 29.9 41.3 66.3 4.4 1.1

CAPITALAND COMMERCIAL TRUST C61U 8,100 26.9 36.9 79.3 4.0 1.0

FRASERS COMMERCIAL TRUST ND8U 1,522 26.0 30.3 63.8 5.8 0.9 

KEPPEL REIT K71U 4,287 13.1 20.1 43.0 4.3 0.8

OUE COMMERCIAL REIT TS0U 1,461 12.6 -11.9 5.1 6.4 0.6

SUNTEC REIT T82U 5,422 12.4 17.5 33.3 5.0 0.9

Average 20.2 22.4 48.5 5.0 0.9

Source: Bloomberg & StockFacts (data as of 28 June 2019)
*Note: VivoCity mall accounts for 48% of the trust’s FY18/19 gross revenue

Office Rentals Seen Climbing Amidst Tapering Supply

According to a report dated 30 May 2019 by UOB-Kay Hian Research, Singapore’s office market, which bottomed out in the first half of 2017, is now in its second year of recovery, and continued upside for office rentals will likely be supported by tapering supply.

Occupancy for Grade A office space within the core Central Business District has seen a V-shaped recovery, rebounding to a healthy 95.2% in 1Q 2019 from the trough of 91.6% in 3Q 2017, the report noted.

New supply for core CBD office space in the city-state is estimated at 5.33 million square feet between 2019 and 2022, representing an average of 1.36 million square feet per annum, 29% below the 10-year average of 1.91 million square feet, it added.

Likewise, in a 21 June 2019 report, Colliers International projected that rents for Grade A office buildings in Singapore’s CBD will rise by 8% this year and 5% in 2020. It expects new supply in 2019-2021 to average 614,000 square feet per annum or 2% of stock, versus 5% over the past five years. This is anticipated to keep vacancies tight in 2019 through 2021, the report added.

It also noted that growth of the technology, media and telecoms (TMT) and flexible workspace sectors has accounted for most of the net absorption of office space in 2018 and the 2019 year-to-date.

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