Singapore REITs to be seen as growth vehicles in the long term

They will transition from being viewed as yield vehicles.

With GDP growth targets picking up steam in Singapore, UOB Kayhian reckons Singapore REITs to play more of a growth vehicle role rather than just being yield catalyst.

"S-REITs are about to transition from being viewed as yield vehicles to growth vehicles, especially in light of encouraging US and Singapore economic data, with Fed fund futures implying a 100% likelihood of a hike next month," the brokerage firm said.

Despite the prospects of a rate hike in June, the market could likely view REITs as growth vehicles and could see REITs an attractive asset class. The firm mentioned that yield compression to the upcycle average spread of 2.8% implies over 23% upside potential for REITs.

" We prefer deep-value and diversified REITs like CCT and FLT, and those with significant business park exposure, namely AREIT. We opine that AREIT’s business/science park and hi-tech portfolio (48% of overall portfolio value) will position it defensively against the slowdown in Singapore from the unprecedented simultaneous supply glut across other industrial segments," UOB KayHian said.