SINGAPORE - Nine real estate investment trusts (Reit) listed in Singapore are likely to remain resilient in 2016 despite difficult macroeconomic environment, ratings agency Fitch said on Wednesday.
The sector's low leverage, robust interest coverage and manageable debt and lease contract maturities will help them sail through the headwinds, Fitch said in the new report.
Retail sales in Hong Kong - where the retail SREITs earned 23 per cent of their 2015 revenue - are under the most pressure from slowing economic activity.
Hong Kong retail sales fell 6.5 per cent in January 2016 from the previous year. However, most of the sales decrease came from high street shops, whereas retail malls continued performing well because they serve as lifestyle destinations.
Retail sales in Singapore (excluding motor vehicles) increased 1.4 per cent in January 2016 on earlier Lunar New Year spending, after falling for four consecutive months. In comparison, sales in mainland China and Indonesia recorded double-digit growth throughout 2015 and posted gains of 10.2 per cent and 11.7 per cent respectively in January 2016.
Fitch said it expected Singapore retail sector vacancy rates to rise to 10 per cent in 2016 from 8 per cent at the end of 2015, driven by weak domestic demand and an expected 4 per cent increase in retail space. However, the impact on retail SREIT earnings will be limited to the 20 per cent of the sector's leases coming up for renewal.
Fitch expects retail SREITs with higher exposure to the Orchard Road malls and Downtown core areas to fare better, due to stronger demand and limited new supply.