SREITs’ retail, office, hospitality saw strong recovery in Q4 2023: analyst

Hospitality and retail will continue to benefit from visitor arrivals and domestic spending.

The last three months of 2023 shaped up to be a quarter of recoveries for Singaporean REITs.

S-REITs saw their retail, office, and hospitality properties log recoveries during the quarter, at least according to a report by UOB Kay Hian analyst Jonathan Koh.

“S-REITs is a resilient sector that could weather geopolitical uncertainties and potential slowdown in economic growth. Our top picks are hospitality and retail plays, which benefit from continued recovery in visitor arrivals and resilient domestic consumer spending,” Koh said.

Most downtown malls reportedly achieved positive double-digit rental reversions, on the back of tourism and back-to-office momentum. Suntec City Mall saw a rental reversion of 25.7%, whilst VivoCity logged a 14.2% rise. However, Suntec City Mall’s occupancy saw lower occupancy due to the closure of Pure Fitness and Pure Yoga on October 2023.

CapitaLand Integrated Commercial Trust (CICT)’s retail leases also saw a pick-up of positive rental reversions: 11.1% for downtown and 13% for suburban properties. Lendlease REIT (LREIT) reported a 15.7% positive rental reversion, driven by 313@Somerset.

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Office, hospitality do good
The office property sector also logged positive rental reversions: Keppel REIT (KREIT) achieved 11.3% during the quarter, with its 8 Chifley Square achieving full occupancy. CICT also performed well in this sector, with its office properties logging a positive rent reversion of 9.1%. 

Suntec REIT’s Singapore office portfolio achieved a positive rental reversion of 13.1% in Q4, extending the 14% rent reversion the previous quarter, with Suntec City Office fully occupied.

Hospitality fared the best, despite a resurgence of COVID-19 cases in November and December.

As a result, the revenue per available room (RevPAR) of CDL Hospitality Trust (CDREIT) and Far East Hospitality Trust (FEHT) moderated to 3.5% growth and 19.9% growth, respectively, in the last six months of 2023. Both saw net property income (NPI) growth of 4% (CDREIT) and 25% (FEHT). 

CapitaLand Ascott (CLAS) reported a 4% growth in RevPAR globally, with gross profit growing 12%. 

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Headwinds
Not all property sectors saw recovery, however. Although S-REITs involved in logistics properties saw strong rental reversions in their Singaporean, Australia, and German properties, management cautioned on weakness in China.

The management of Mapletree Logistics (MLT), in particular, cautioned that weakness for China could persist for the next 6-12 months.

CapitaLand Ascendas (CLAR) registered a rental reversion of 53.6% in Singapore and 9.1% in Austrlia, which it credited to supply and adoption of just-in-case supply chain management. Frasers L&C Trust (FLT) also reported positive rental reversion in Australia, and Germany.