Will CapitaLand Mall Trust survive 2016’s weak retail climate?

Rental reversion already tapered to 3.7% last year.

Despite the tepid retail landscape, CapitaLand Mall Trust’s (CMT) performance will remain robust in 2016.

According to a report by OCBC, CMT’s share price has climbed 11.9% YTD, making it the top performing S-REIT. It has dominated the STI and FTSE ST REIT Index which have declined 5.4% and 3.3% YTD, respectively.

The report asserts that this is largely thanks to investors fleeing to safety as the blue-chip S-REITS with high quality assets have largely performed better in light of the uncertain macroeconomic environment and volatility in the financial markets.

Moreover, it was not surprising that CMT exhibited a pullback in its rental reversion to 3.7% in FY15, given the sorry state of Singapore’s retail industry. Last year saw meagre growth in retail sales. Excluding motor vehicles, retail sales would have dropped 3.6% YoY. Rentals of the private sector retail space also languished in 2015, as decline was seen through Q2 to Q4.

Looking ahead, headwinds facing the retail sector are expected to keep posing challenges for retail REITS like CMT. However, OCBC expects CMT remain resilient and continue delivering positive rental reversions in 2016.