Retail sector remains buoyant despite market uncertainties

Only one REIT company registered negative DPU growth.

OCBC Investment Research believes that macroeconomic uncertainties and supply concerns would continue to exert pressure on the operational performance of REITs. This, it said is broad based across the various sectors, although some REITs have proven to be resilient, including the retail sector.

Retail REITs turned in a relatively resilient performance for the 2QCY16 period. Under OCBC's coverage, only CapitaLand Retail China Trust recorded negative YoY DPU growth, while other overseas focused retail REITs fared better.

Mapletree Greater China Commercial Trust reported +9.1% YoY while Lippo Malls Indonesia Retail Trust recorded +16.4% YoY.

Furthermore, occupancy rates and rental reversions largely held up, with only OUE Hospitality Trust’s Mandarin Gallery and Starhill Global REIT’s Wisma Atria (retail) turning in negative rental reversions during the period.

On the other hand, OCBC said that tenants’ sales faced more challenges, given the tepid macroeconomic environment, but it noted that gross turnover rents typically form a small percentage of REITs’ overall gross rental income.

"We believe the situation at Wisma Atria (retail) could improve ahead, as Isetan’s strata-owned space at the property has progressively reopened for operations after its renovation works since Apr last year," said OCBC.

Isetan recently launched Japan Food Town at the mall, a collection of 16 casual dining establishments handpicked from Japan.