What's next for Ascendas REIT after its dreary FY15?

The worst may be over, but don't get too excited yet.

Ascendas REIT suffered one of its worst years in FY15, as the group grappled with lower occupancies on back of a spate of lease expiries.

According to Barclays, around 10% of AREIT's portfolio or 246,000 sqm of Single User Assets (SUA) was up for expiry in FY15, with occupancy bottoming at 85.6% in September 2014.

Barclays expects that the worst is over for SUAs, but AREIT is still in for an unexciting year.

Only ten SUAs of 138,000sqm will be due for expiry in FY16, a decline of 44% year-on-year. However, AREIT's capacity for accretive acquisitions will be tempered by the 12.8% vacancy in its portfolio.

"Management expects to continue making acquisitions given the acquisition pipeline from its sponsor of over S$1bn. However, it will remain selective and it is unlikely to hit the S$770mn levels achieved in FY15. With 33.5% gearing, any acquisition would likely require an equity raising. While acquisition growth is unlikely to excite, we think AREIT remains attractive,” Barclays said.