There are “multiple positive surprises” among Singapore industrial REITs, and logistics assets are expected to outperform other properties, say DBS Group Research analysts Dale Lai and Derek Tan in a June 9 note. 

Lai and Tan’s top picks to “buy” are ARA Logos Logistics Trust (ALLT), with a target price of 85 cents, and Mapletree Logistics Trust (MLT), with a target price of $2.35.

AALT invests in quality income-producing real estate used for logistics purposes, as well as real estate-related assets, in Asia Pacific. MLT invests in logistics warehouses in the Asia Pacific region.

Lai and Tan note an uptick in occupancy and rental rates. “Overall industrial properties occupancy and rental rates in 1Q2021 inched up 0.1% and 0.6% q-o-q, respectively. The higher occupancy and rental rates were most pronounced for the multiple-user factory space as construction delays continue to ease concerns over spike in new supply.”


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Since the turn of the year, leasing activities have picked up and rental rates continue to inch up. Although the multiple-user factory space was originally projected to face pressure due to a spike in supply, it was the best performing segment, say Lai and Tan.

The broad economic recovery, as well as delays in construction, played a role in the segment’s outperformance, say the analysts. Occupancy and rental rates of multiple-use factory posted the highest improvement among all industrial property types, increasing 0.5% and 0.8% respectively. 

1QFY2021 was the fourth consecutive quarter of positive net absorption. Despite the muted demand for new industrial space in FY2020, construction delays meant that only 357,000 sq m of new industrial space was added for the whole year, a record low. With the bulk of new supply delayed to this year, a total of 2.5 million sq m of new supply is expected to come online in FY2021, write Lai and Tan.


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Due to the spike in Covid-19 transmissions, the ongoing heightened measures could cause a blip to leasing activities in the early part of 2Q2021, write Lai and Tan. “However, Singapore’s broader economic recovery in FY2021 will likely support the rebound of the manufacturing industry and we believe the industrial sector will benefit from the economic recovery as it continues its structural transition into Industry 4.0.”

In addition to the ongoing expansion of the logistics sector, the recovery of the manufacturing sector and the rebound of the commodities sector will likely drive demand for industrial properties in FY2021, write Lai and Tan. 

“New economy businesses such as biomedical sciences and technology firms will continue their expansion in the business parks assets. However, we believe that city fringe precincts such as Buona Vista and Alexandra will likely outperform business parks in the rest of the island,” they add.

Industrial REITs are continuing their stellar growth trajectory, write Lai and Tan. “Having been the most active REIT sector in FY2020, industrial S-REITs once again claimed the top spot year-to-date in 2021.”


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With an influx of portfolio deals, industrial REITs have so far announced and completed more than $6 billion worth of acquisitions in FY2021, they note. “As we are still in the first half of the year, we expect to see more deals from the sector. With more accretive acquisitions and some organic portfolio growth, we can expect the industrial REIT sector to outperform the other segments in the near-term.”

Stockpiling activities were the main driver of new demand for industrial space in FY2020, say Lai and Tan. “With stockpiling activities nearing its plateau, we expect expansion activities in FY2021 to come mainly from new economy businesses including the biomedical sciences, precision engineering, technology, infocomm and media, and modern logistics sectors.”

The rebound in the commodities and shipping industries could also provide further upside to the industrial sector in FY202, they add. “These industries are traditionally large occupiers of industrial space and they also help drive demand for many other support services. The continued growth of the new economy businesses, recovery of the shipping and commodities firms, as well as further delays in new supply could support occupancy and rental rates in FY2021.”

As at 1.31pm, units in ARA Logos Logistics Trust are trading 0.5 cents lower, or 0.61% down, at 81 cents; while units in Mapletree Logistics Trust are trading flat at $2.02.

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