Industrial REITs should turn sails to other countries as local demand falters: analysts

Australia is a top target.

The anemic industrial market in Singapore, coupled with the lack of investable assets in the city-state, has pushed industrial real estate investment trusts (REITs) to try their luck overseas.

According to a report by DBS, in recent years, industrial REITs have ventured into overseas markets like Australia.

“One of the overseas markets that is of interest is Australia which we have seen close to A$1.5bn (S$1.5bn) invested there with Ascendas REIT (A-REIT), Mapletree Logistics Trust (MLT) and Cache Logistics Trust (Cache) being the first movers to diversify their portfolios there,” the report noted.

It added that the key attractiveness of Australia is that land is mainly freehold tenure while leases there are fairly long, ranging from 5 years to as long as 20 years.

“It is also a market where there is little speculative built. While asset prices in Australia have been on an upswing in recent years, with both AUDSGD and AUD-SGD exchange rates near 10-year lows meant that overseas buyers will continue to be attracted to buy into Australia, driven by expected lifts from a total returns perspective if the respective exchange rate normalizes in the medium term,” the report noted.