Singapore REITs fear being taken over by bigger rivals

The market is saturated by firms fighting over new supply.

Total returns from Singapore’s SGX S-REIT index hit 21.4% in the first nine months of 2017, an exciting return for a market where the domestic real estate has been in a slump, thinktank Urban Land Institute (ULI) and PwC revealed.

However, in their "Emerging Trends in Real Estate Asia Pacific 2018" report, the market in Singapore is considered saturated. As a result, some investors speculated weaker REITs could be absorbed by bigger players or cashed-up corporate rivals.

More headwinds are likely to hit REITs, due to significant new supply in the pipeline across several asset classes and a firming of rents in the office sector.

Consequently, many REITs continue to look abroad to source new assets.

Australia remains a favourite stomping ground, the report said, although a lack of stock and the high pricing of available assets have seen transactions from foreign investors dip in 2017. South Korea was noted for its untapped logistics market.

Meanwhile, China still has its followers, but the concern about operational difficulties is growing. The report cited concerns such as being subject to the potential of additional taxes and volatility risks.