S-REITs fared well in July over increased attention from funds

The office sector could lead gains in S-REITS amidst its sustained rental improvements.

Singapore real estate investment trusts (SREIT) bounced back to 4.6% from its lowly state in June, DBS Equity Research said. This was amidst property funds switching from developers due to the coolings measures whilst generalist funds are seeking yield over the uncertainties arising from the US-China trade wars.

The research firm noted that the recovery in Q1 was sustained in Q2 as grade A office rents rose 4% QoQ to $10.10 psf pm. According to them, office REITS have been seeing a period of positive rental revisions.

Meanwhile, the hospitality sector recorded a 4% YoY increase in revenue per available room (revPAR).

“However, hospitality REITs with a bigger exposure to upscale hotels disappointed due to softer corporate bookings during the Trump-Kim summit and difficulty in maximising yields due to late bookings by guests,” DBS Equity research explained.

In terms of the retail sector, the pace of negative rental revisions moderated. They also noted that industrial rents are approaching its road to recovery.

DBS Equity Research believes that the office sector remains will lead S-REITS due to the sustained improvement in office rents.