Weak rental reversions to haunt CMT in next few years, say analysts

Climbing labour expenses, weak retail sales are hurting tenants’ profits.

CapitaLand Mall Trust (CMT) is going to see rental reversions to drop within the 3% range, as retailers’ profitability continue to feel the pressure of increasing labour expenses and middling retail sales.

According to a report by DBS, reversions could tumble by as much as 4-5%.

DBS does not believe there is a risk of negative portfolio reversions, though. CMT’s properties, which tout good accessibility and proactive customer retention schemes, should allow the company to weather uncertainties well.

Moreover, CMT’s gearing ratio is seen to remain fairly stable at around 35% over FY16 to end-FY17, in line with management’s range of <40%. And with its hefty portfolio, returns can be improved if CMT pursues more asset enhancement initiatives or brownfield developments.