Singapore Real Estate Investment Trusts to expand in 2011

Low interest rates, supportive capital markets, and improved economic sentiment will push S-REIT to continue to grow this year.

According to Moody's Investors Service, a stable growth for S-REIT is to be expected.

"The S-REITs will use their well-capitalized balanced sheets to fund their acquisitive growth strategies in 2011," says Alvin Tan, a Moody's Associate Analyst.

"Our ratings for the trusts take into consideration that they will fund their purchases with a mixture of debt and equity, while maintaining gearing within targeted limits," he says.

"We expect low interest rates to continue this year, and these low rates make a rise in gearing more attractive. Nevertheless, we expect rated S-REITs to adopt a more conservative approach, given the lessons learned during the financial crisis," adds Tan.

Continued growth in rental rates and high occupancy will benefit the rated S-REITs, and at the same time there is ample liquidity in the market and support from sponsors.

As a result, Moody's maintains its stable outlook on the sector.

Moodys's revised the outlook on the S-REIT sector to stable from negative in June 2010 due to the strong rebound in Singapore's economy; stabilization of rents across the retail, office and industrial property sub-sectors; steady performances, and lower refinancing risk for the rated S-REITs.

With the availability of new properties and the expected slowdown of GDP growth to around 4.5% in 2011, rental rates will grow more gradually across these three sectors.