Strong hospitality growth, double-digit rental reversions buoy SREITs in Q3

Frasers Centrepoint Trust saw steady rent growth from its suburban malls this quarter.

Singapore REITs (S-REITs) performed in line with forecasts, with strong growth in the hospitality sector and positive rental reversions in retail, office, and industrial properties.

The hospitality sub-sector registered strong net property income (NPI) growth, averaging a 26% rise in Q3 compared to the same period in 2022. This comes as the average length of stay increased to 3.55 days, 9% above pre-pandemic levels.

In the retail space, the recovery of downtown malls and resiliency of suburban malls helped drive positive rental reversion.

Retail rents are rising, supported by retailers’ optimism on consumer sentiment, UOB Kay Hian analyst Jonathan Koh noted in a report on S-REITs.

“Most downtown malls achieved positive double-digit rental reversion, such as Suntec City Mall (25.3%) and MPACT’s VivoCity (14.2%), due to recovery in tourism,” Koh said.

Notably, Frasers Centrepoint Trust (FCT) saw steady positive rental reversion of +4.7% for its suburban malls, driven by Causeway Point (5.4%), Waterway Point (5.1%) and Northpoint City North Wing (6.9%). 

FCT is further expected to complete Tampines 1 in November 23, and additional prime retail space of 8,000 square feet (sqft) will open in December, ahead of the festive season.

CapitaLand Integrated Commercial Trust (CICT)’s retail leases registered positive rental reversions of 8.8% in Q3. Lendlease Global Commercial REIT (LREIT) also experienced strong positive rental reversion of 16.3% in its equivalent quarter.

‘Confounding’ office resiliency
The office space is also showing resilience, with the vacancy rate in the central business district (CBD) tightening significantly by 0.8ppt quarter-on-quarter to 3.2% in Q3.

The amount of shadow space was estimated to have reduced by half to 0.33m sf compared to a record high of 0.7m sf in Q1. 

Keppel REIT (KREIT), notably, achieved positive rental reversion of 10.7% in Q3. In Sydney, the new government tenant took up two additional floors at 8 Chifley Square, which increased occupancy by 9.7ppt quarter-to-quarter to 97.1%. 

CapitaLand Integrated Commercial Trust (CICT), meanwhile, achieved positive rent reversions of 8.8% for its office properties in the first nine months of 2023. SUN’s Singapore office portfolio achieved positive rental reversion of 14% in Q3, extending the 10.5% positive rental reversion it logged in Q2.