Post-COVID property demand to buoy REITs earnings rebound

CICT, Frasers, and Mapletree Commercial Trust are best positioned to reap the benefits.

The credit quality of REITs and large property developers in Singapore will benefit through 2023 from the recovery of demand for commercial property following the easing of COVID-curbs, reports Moody’s Investors Service.
 
CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, and Mapletree Commercial Trust are reportedly the best positioned to capture the pent-up demand as they have both retail and office assets in Singapore.
 
City Developments, GuocoLand, and the UOL Group will also benefit given their investment and hospitality portfolio.
 
"Higher retail sales and footfall following the easing of COVID curbs will reduce the need for rent rebates, which will support an earnings rebound at retail assets,” said Moody’s analyst Yu Sheng Tay.
 
Office rents will also receive a boost amidst a limited supply of new quality office assets, and as employees return to the office, Tay added.
 
On the residential front, sales volumes are likely to weaken, although prices will remain supported by a lower supply pipeline.
 
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"We expect large developers' earnings from residential development to rise in 2023 as they recognize revenue from strong contracted sales achieved in 2021," says Hui Ting Sim, a Moody's assistant vice president and analyst.
 
Overall, the recovery pace of property sales–both residential and commercial–will slow in 2023, amidst inflation and rising interest rates, which will likely hurt consumer sentiment. This should not affect the growth rate of property developers’ earnings, given the low base in 2020-21, Moody’s added.