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The evolution of Singapore's industrial landscape, together with technology, and the need for more efficient and modern facilities, have led to increasing demand for business parks, high-specs industrial properties, and modernised logistics spaces. And the onset of the Covid-19 pandemic only served to accelerated this. Over the past decade, we have seen industrial S-REITs rejuvenating their portfolios – pivoting their exposure towards new economy assets.
Looking ahead, we expect pipeline acquisitions from sponsors to feature heavily in the growth of industrial S-REITs, especially large-cap names. Capitalise on the sector’s growth by investing alongside structural growth trends within the new economy assets of logistics, data centres, and business parks, which we believe will deliver a potent mix of growth and capital upside for your portfolio.
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Large-cap S-REITs
We believe the large-cap REITs' pivot towards new economy assets will continue to support the premiums that they trade at and recommend paying more attention to industrial REITs that have sponsor pipelines to more new economy assets for future growth.
We like Frasers Logistics & Commercial Trust and Mapletree Logistics Trust for their growth potential and access to high-quality new economy assets that are increasingly becoming harder to come by. We also like Ascendas REIT for its diversified exposure to new economy asset plays, coupled with its attractive yields.
Mid-cap S-REITs
We believe selected mid-cap industrial REITs may also benefit from sponsor's pipelines. With a lower cost of capital, we believe ARA LOGOS Logistics Trust and ESR REIT could have access to a larger pool of realisable pipeline from their sponsors.
Furthermore, the recent inclusion of the three mid-cap S-REITs into the FTSE EPRA NAREIT Developed Asia Index is likely to be a catalyst for some upside. Historically, REITs have seen very healthy share price improvements on news of index inclusion.
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