Surging Ascendas REIT collides with industrial sector roadblock

They can’t pop the champagne just yet.

Now is not the time to celebrate for the property firm, even after a modest jump in its earnings, as a gloomy industrial market lurks just around the corner.

According to RHB Research, muted rental growth is almost inevitable for Ascendas REIT, expecting the challenging leasing environment to contend with.

RHB Research says JTC’s 3Q figures added to the disappointment as the industrial property price and rental index declined by 0.3% and 0.8% respectively.

Meanwhile, Ascendas REIT’s healthy lease expiry may be just what the doctor ordered to counter the industrial sector slowdown.

“About 10.2% of leases by rental income are due for renewal over the next two quarters. We note that business parks, hi-specs industrial and logistics buildings which collectively account for 82% of the expiring leases are significantly below market rates,” RHB Research said.

“Market rents are 21.1% above logistics (22% of expiring leases) passing rents, 6.4% above the passing rents for business park space (27%) and 5.7% above passing hi-specs (33%) rents,” they added.