Phillip 2018 Singapore Strategy: REITs (Industrial) Sector December 19, 2017 1753

This report is part of theĀ Phillip 2018 Singapore Strategy Report.

  • Sector occupancy and Rental Index still searching for a bottom
  • Maintain Neutral view on the sector
  • Improvement in occupancy would lead us to upgrade our sector view

2017 Review

Sector average valuation has crept up during the year, and yields correspondingly compressed. Performance of individual names has been mixed, with winners driven by inorganic growth backed by strong balance sheets; and losers dragged by lower net property income (mainly from conversions or tenant defaults).

JTC data for the sector shows that occupancy and rents moderated during the year, due to overwhelming new supply coming on stream to the market. Both occupancy and rents for the overall industrial sector have not bottomed, despite robust industrial activity.

Business Park remained the most resilient within the sector, due to better building specifications and little new supply.


New supply is tapering off in 2018, but will need strong demand to absorb the new supply and the vacancies carried over from 2017. We expect negative reversions to persist into 2018, and rents to bottom by the end of 2018.


Our top pick is A-REIT. We like A-REIT because of its track record for growth through asset re-balancing, and stability from its diversified portfolio. A-REIT has exposure to higher value-added manufacturing, through its Business & Science Park properties.

Other REITs that we think investors should keep on their radars and accumulate on price weakness are Mapletree Industrial Trust and Keppel DC REIT.


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About the author

Profile photo of Richard Leow

Richard Leow
Research Analyst
Phillip Securities Research Pte Ltd

Richard covers the Transport Sector and Industrial REITs. He graduated with a Master of Science in Applied Finance from the Singapore Management University. He holds the CFTe and FRM certifications and is a CFA charterholder.

He was ranked #2 Top Stock Picker (Asia) for Real Estate Investment Trusts in the 2018 Thomson Reuters Analyst Awards, and ranked #2 Top Stock Picker (Singapore) for Resources & Infrastructure in the 2016 Thomson Reuters Analyst Awards.

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