Earnings of prime retail malls will take longer to reach 2019 levels: Fitch

An example of these malls are those owned by Starhill Global Reit.

Despite the economic reopening, prime retail malls’ earnings will take longer to return to 2019 levels, Fitch Solutions, said in its report.

This is due to their dependence on tourists entering the market whilst visitors from China will also remain slow. Malls owned by Starhill Global real estate investment trusts (Reits) are hit by these challenges.

For its other counterparts in retail Reits, earnings may revive in the next six to 12 months from foreign visitors and locals going back to their offices.

“Prime office properties will benefit from a flight to quality amid the adoption of hybrid working, rising unemployment and weaker investment sentiment as growth slows,” Fitch also noted.

Overall, just like other analysts, Fitch said they see most rated Singapore Reits to become resilient to a global economic slowdown in 2023 because of their healthy leverage, limited exposure to rising interest rates and utility costs, as well as robust financing flexibility.

“Their Stable Outlooks reflect our expectations of limited rating changes in the next 12 months,” said Fitch.

The analyst cited logistics Reits and industrial Reits as the most resilient amongst most rated Reits in the Lion City.

“Logistics will benefit from rising e-commerce adoption, supply-chain reshoring and inventory stockpiling,” said Fitch.

For example, industrial REITs exposed to advanced tech buildings and data centres such as Mapletree Industrial Trust (BBB+/Stable) will be uplifted by long-term leases to large corporate tenants.

Unlike prime malls, the Reits in the hospitality industry will recover from pandemic-led disruption to global travel in the next six months.

“REITs that are rapidly diversifying into longer-stay assets such as Ascott Real Estate Investment Trust are better placed to weather sector-specific challenges,” said Fitch.