Analyst cites factors to boost Industrial Reits value

It includes location, asset management and sustainability focus.

Industrial REITs are acquiring overseas assets due to Singapore’s shorter industrial and lease tenure, which poses preservation of building value due to lease decay, said RHB.

In its brokerage report, RHB said the “mitigation factor to address these challenges is the strong favourable policy regime and the government’s foresight in planning and support that has ensured a steady stream of pipeline demand over the years, with supply being moderated accordingly.”

It said four key factors to preserve and grow value of industrial buildings in REITs include:

1. Location of industrial assets such as providing access to transportation and presence in industrial cluster
2. Asset enhancement and rejuvenation through redevelopment to maximise GFA or adapt to fast changing industrial sector trends.
3. Modern design specifications of buildings with effective space utilisation
4. Provide a sustainability focus to help cut carbon emissions, power consumption as well as access to renewable energy sources such as solar power, and electric vehicle charging points, amongst others.

Industrial Reit winners

REITs that have exposure to logistics, high tech, and business parks are amongst the top picks of RHB.

The analyst cited CAREIT, ESR-Logos REIT, and AIMS APAC REIT as the top firms for the industrial REIT segment.

For CAREIT, its Singapore Business Park space provides a good mix for research and development firms, technology firms, and high-tech manufacturing sectors.

ESR-Logos REIT’s post merger with ARA Logos Logistics Trust also contributed to the portfolio of the firm. 

RHB said AIMS APAC REIT “remains an attractive proxy to the favourable Singapore industrial sector outlook, with a majority of its income derived from the attractive logistics sector and long leased Australian business parks.”