The year 2021 will be a year to gain back footing as “tenants and landlords evaluate their business prospects,” say CGS-CIMB Research analysts Eing Kar Mei and Lock Mun Yee, as they maintain “overweight” on the sector in a March 3 report.

During the 4QFY2020, pent-up demand saw higher tenant sales among Singapore REITs (S-REITs). Occupancy during the quarter remained high at over 95%, though rental reversions were in negative territory.

“To maintain malls’ occupancy rates, landlords are now more flexible in leasing terms, but the lease structure remains largely unchanged, with short-term leases and gross turnover (GTO) rent structures making up just a small portion of total rental income. Rental deferment and pre-term requests remain a handful, and rental rebates are given on a targeted basis,” they write.

“Going forward, we believe the leasing environment remains challenging and have pencilled in -3% to -20% rental reversions,” say Eing and Lock.


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Frasers Centrepoint Trust (FCT) and SPH REIT have the largest portion of lease expiries in FY2021.

“FCT has renewed 25% of the expiries due in FY21, and 29% of the leases remain to be renewed by end-FY21. Fortunately, we understand that most of these tenants are doing satisfactorily,” they say.

“As for SPH REIT, we believe it will not have issues renewing/backfilling potential vacancies given the strategic location of Paragon, but this is likely to be achieved at the expense of rental reversion. We are less concerned about its malls in Australia as tenant sales have almost recovered to the previous year’s 2019 level,” they add.

The pair say they also expect footfall to improve in 2021 on easing capacity limits and amid returning office crowds.


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“Among the retail REITs, we believe Mapletree Commercial Trust (MCT) is in the best position for inorganic growth, given its more stable income and lower cost of equity,” they write.

That said, Eing and Lock’s top pick remains Frasers Centrepoint Trust (FCT) “as we expect it to recover faster from Covid-19 vs. its peers” amid improving shopper traffic and as the office crowd returns on easing social distancing measures.

“We also like LREIT due to the long lease structure of Sky Complex, which would lessen the impact of negative rental reversions on overall income; it is also trading below book at 0.9 times,” they add.

As at 11.11am, units in FCT, LREIT, MCT and SPH REIT are trading at $2.47, 78 cents, $2.03 and 83.5 cents.