Retail S-Reits’ high occupancy, firm yields keep analysts positive

[SINGAPORE] Interest in retail-focused real estate investment trusts (Reits) remains strong despite signs of slowing retail sales and a flurry of tenant exits, with malls maintaining high occupancy and firm earnings.

Retail Singapore-listed Reits (S-Reits) reported improved operating metrics in the latest earnings season, sporting higher distribution yields amid continuing tenant churn as rents rose. Low vacancy rates, positive rent reversions and revenue growth also helped drive capital values of retail assets, analysts said.

Islandwide retail rents rose 0.5 per cent in 2024 after creeping up 0.4 per cent in 2023, according to official data. Overall retail sales grew 1.2 per cent in 2024, slower than the 2.3 per cent in 2023. Top-tier retail Reits reported positive rent reversions of between 5 and 9 per cent in FY2024. With analysts expecting similar rent increases this year, retail plays could emerge as winners as landlords holding prime assets continue to have the upper hand.

Darren Chan, Phillip Securities’ senior research analyst, is overall positive on retail S-Reits as he expects rent reversions to stay in the “high single-digit range”, supported by “tight incoming supply”.

“In the current environment, we expect suburban malls to outperform, as a downtrading trend among tourists appears to be weighing on tenant sales at downtown luxury malls.”