Top 3 performing office S-Reits average 27.6% return in 1st half

New supply of core CBD office space is estimated at 5.33 million sq ft between this year and 2022, representing an average of 1.36 million sq ft per year, 29 per cent below the 10-year average of 1.91 million sq ft, according to UOB Kay Hian Research
New supply of core CBD office space is estimated at 5.33 million sq ft between this year and 2022, representing an average of 1.36 million sq ft per year, 29 per cent below the 10-year average of 1.91 million sq ft, according to UOB Kay Hian Research.ST FILE PHOTO

The top three performing Singapore real estate investment trusts (S-Reits) that own office assets here averaged a total return of 27.6 per cent in the first half of this year, bourse operator Singapore Exchange (SGX) said yesterday.

Of the 34 SGX-listed Reits, 10 are engaged in the acquisition, development, ownership, leasing, management and operation of office properties in Singapore, Malaysia, South Korea, Australia, Europe and the United States.

These 10 office Reits have a combined market capitalisation of more than $30 billion, and six of them own Singapore office assets. The six are CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec Reit, Keppel Reit, Frasers Commercial Trust and OUE Commercial Reit.

The three best performers out of the six by return were Mapletree Commercial Trust (29.9 per cent), CapitaLand Commercial Trust (26.9 per cent) and Frasers Commercial Trust (26 per cent).

Suntec Reit and Mapletree Commercial Trust also have commercial and retail assets in their portfolios.

The office market in Singapore, which bottomed out in the first half of 2017, is in its second year of recovery, and office rentals will likely continue rising amid tapering supply, according to a May 30 report by UOB Kay Hian Research.

The occupancy rate for Grade A office space in the core Central Business District (CBD) has seen a V-shaped recovery, rebounding to a healthy 95.2 per cent in the first quarter this year from the trough of 91.6 per cent in the third quarter of 2017, the report noted.

New supply of core CBD office space in Singapore is estimated at 5.33 million sq ft between this year and 2022, representing an average of 1.36 million sq ft per year, 29 per cent below the 10-year average of 1.91 million sq ft, UOB Kay Hian Research added.

Likewise, in a June 21 report, Colliers International projected that rents for Grade A office buildings in the CBD will increase by 8 per cent this year and 5 per cent next year.

Colliers expects new supply in the 2019-2021 period to average 614,000 sq ft per year or 2 per cent of stock, versus 5 per cent over the past five years. This is expected to keep vacancies tight till 2021, the report said.

The Colliers report also noted that the growth of the technology, media and telecoms sector and the flexible workspace sector accounted for most of the net absorption of office space in 2018 and the 2019 year to date.

SGX yesterday also said that S-Reits were the top net-buy sector in the first six months of this year, drawing net institutional inflows of $396.3 million during the period.

Last month, S-Reits were also the top net-buy sector, attracting inflows of $223.1 million. It was the second top net-buy sector in May.

CapitaLand Commercial Trust topped June's net-buy list, drawing inflows of $58.6 million.

SGX lists 34 Reits, seven stapled trusts and three property trusts, with a combined market capitalisation of more than $100 billion.

Two of the stapled trusts - ARA US Hospitality Trust and Eagle Hospitality Trust - debuted on the bourse's mainboard in May.

A version of this article appeared in the print edition of The Straits Times on July 03, 2019, with the headline 'Top 3 performing office S-Reits average 27.6% return in 1st half'. Print Edition | Subscribe