The government’s plans to open borders with additional vaccinated travel lanes (VTL) from two currently to nine more countries from Oct 19 is likely to be better for hospitality and lodging REITs. On the other hand, more controls locally, for visitors to malls and continued controls on dining could be mildly negative for retail REITs.

Only groups of up to two fully vaccinated persons will be allowed to enter shopping malls/large standalone stores covering over 930 sq m in gross floor area and dine-in at hawker centres, coffee shops, and all other regular F&B establishments from Oct 13 onwards. The government has since allowed a one-week grace period for the process to be implemented at malls.


See: REITs can't fully camouflage gearing with perpetual securities


Citi Research reckons these steps are mildly positive for hospitality, and mildly negative for retail malls. Already, 83% of the population is fully vaccinated, hence the additional controls are not likely to have a large impact on malls.

“Additional VTLs could divert a proportion of tenant sales to flight tickets and overseas expenditures during the traditionally stronger 4Q for retailers, especially among households without children and living alone (including singles), which account for around 17% and 16% respectively of total resident households. Incremental tourists via VTLs should improve hotel RevPAR, through the contribution from these nine countries,” Citi says.  

In a separate report S&P Global analysts think that retail REITs are likely to be adversely impacted by e-commerce. Interestingly, e-commerce has been around for more than 10 years, and retail REITs have had more than enough time to provide omnichannel avenues for their tenants to market their goods. At any rate, entire populations are unlikely to permanently live in the metaverse including Gen Z, which is a smaller demographic than millennials and baby boomers.  

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For Singapore, if tourists start to trickle in, they could also spend in our city malls. REITs with important city malls include Suntec REIT, Mapletree Commercial Trust, Lendlease Global Commercial REIT, Starhill Global REIT, and SPH REIT. CapitaLand Integrated Commercial Trust owns Plaza Singapura, Bugis Junction, Bugis+ and Raffles City, but its AUM, comprising of integrated developments, office buildings, suburban malls and city malls, tops $21 billion   


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SPH REIT announced that distributions per unit (DPU) rose by 98% to 5.2 cents in FY2021, for the 12 months to Aug 31. Although visitor traffic fell by double digits in three of its malls, tenant sales rose by 5% y-o-y for Clementi Mall and Westfield Marion; and fell by 1% for The Paragon, and 7% for Figtree Grove. While shopper traffice and retail spending are not back to pre-pandemic levels, they are better than pandemic levels. SPH REIT’s unit price is up 11.6% this year, to 96 cents.