RATINGS agency Moody's says the outlook for Singapore's real estate investment trust (Reit) sector is stable, backed by a healthy operating environment and manageable refinancing risk.
While funding costs are expected to increase with the rising interest rate environment, Moody's noted that the 17 Singapore-based Reits it rates are insulated as more than half of their outstanding debt is tied to fixed interest rates.
In addition, majority of its debt matures in five calendar years and beyond, with no more than 30 per cent of debt needing refinancing in any single year.
"The outlook reflects our view that the sector's Ebitda (earnings before interest, taxes, depreciation and amortisation) will grow by 4 per cent in 2014, supported by a larger asset base and some positive rental revisions," said Jacintha Poh, a Moody's assistant vice-president and analyst.
Of the property segments, Reits in the office sector are likely to perform well, given that the tight supply of new office space in the core central business district will improve occupancy rates and give landlords greater pricing power, said Moody's.
On the retail front, weaker tenant sales and a lack of demand will slow the take-up rate for new retail space, creating a challenging environment for upcoming supply. Meanwhile, the increasing supply pipeline in the hotel segment, coupled with moderating growth in tourist arrivals and tourism spending, will likely cap growth in average room rates.
Moody's added that there is potential weakness in the warehousing segment, where a spike in the supply of new warehouse space will pressure occupancy and rentals. Nevertheless, it estimates that at least 60 per cent of this has been pre-committed by end-users.
Moody's rates 17 S-Reits, of which 16 carry stable outlook. The exception is Mapletree Commercial Trust, whose Baa2 rating carries a positive outlook.