Top office REITs averaged 19.6% YTD return

Mapletree Commercial Trust was the strongest performer with YTD total returns of 28.6%.

Singapore's top four office REITs hit an average return of 19.6% YTD, bringing their 1Y and 3Y total returns to 20.1% and 51.5% respectively, according to a note from SGX.

Also read: S-REITs DPU to grow 2% by 2020

The four companies, which include CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec REIT and Keppel REIT, averaged a price-to-book ratio of 0.9x and a dividend indicated yield of 4.6%. Mapletree Commercial Trust emerged as the strongest performer with YTD returns of 28.6%, followed by CapitaLand Commercial Trust at 26.9%.

The prospect of rising rents brought about by shrinking supply bodes well for the recovering office sector. Rents are tipped to rise by 8% in 2019 and 5% in 2020, according to projections by Colliers International cited by SGX. 

Also read: Average CBD Grade A office rents hit 10-year high in Q2

For the June quarter, the four largest office REITs averaged a DPU of $0.021, with Suntec REIT reported the highest DPU of $0.024.

Although S-REITs have trailed behind the benchmark STI at the start of 2018, the sector rallied in Q4 2018 as the Fed assumed a more dovish stance. Rattled investors found refuge in the asset class, with the S-REIT sector emerging as the top net buy sector in the first six months of 2019, drawing net institutional inflows of $396.3m over the period.

S-REITs was also the top net buy sector in June, with CapitaLand Commercial Trust topping the institutional net buy list.