Singapore’s Office Market In Better Position Than Malaysia’s
SINGAPORE – Two analysts from RHB Group Research believes that the city-state’s office market is in a better position than its neighbour’s as the former is set to benefit from the regional expansion of technology, media and telecommunications (TMT) firms, reported The Edge on Thursday morning (11 February).
“While the office sector in Malaysia will continue to see pressure on occupancy and rental reversions, the situation is more favourable in Singapore, where top TMT players have been busy hiring and expanding,” said Vijay Natarajan and Loong Kok Wen.
They also pointed out that Singapore has reaped benefits from the US-China trade war and the mass demonstrations in Hong Kong, which have prompted many Chinese tech firms and financial institutions to transfer to the city-state.
In a research note published on Wednesday, the analysts said they favour Singapore real estate investment trusts (S-REITs) than Malaysian REITs (M-REITs) as the city-state has successfully subdued the spread of COVID-19 as compared with the Malaysian authorities.
In fact, Singapore has already entered into the third phase of reopening its economy. This means its earnings recovery outlook is more appealing, and the value of S-REITs’ properties should be relatively more stable.
As such, Natarajan and Loong are advising investors to target small- and mid-cap S-REITs for a post-pandemic recovery play due to their better valuations. In contrast, “recovery in Malaysia is now delayed, possibly until late 2021.”
In particular, their top S-REIT picks are Suntec REIT, Prime US REIT, and ARA Logos Logistics Trust.
Meanwhile, the top picks for DBS’s analysts Derek Tan & Rachel Tan are Ascendas REIT and Capitaland Integrated Commercial Trust (CICT).
But their number one choice is Ascendas REIT as its portfolio has lower earnings risks, as the lion’s share of its properties are benefitting from the flourishing e-commerce sector. Specifically, around 74 percent of its assets consist of logistics, business parks, hi-specs spaces, and data centres.
In comparison, around 54 percent of CICT’s tenants are from industries that could see a slower recovery this year due to the lasting effects of the pandemic, while its office occupancies could be negatively impacted if businesses continue or ramp up their flexible work arrangements.