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3 best-performing office S-Reits returned 28% in year to date: SGX

THE top three performing Singapore real estate investment trusts (S-Reits) that own office assets in the city-state averaged a total return of 27.6 per cent in January to June this year, bourse operator Singapore Exchange (SGX) said on Tuesday.

Of the 34 Reits listed on the SGX, 10 are engaged in the acquisition, development, ownership, leasing, management and operation of office properties located in Singapore, Malaysia, South Korea, Australia, Europe and the US.

These 10 office Reits have a combined market capitalisation of more than S$30 billion, and six of them own Singapore office assets: CapitaLand Commercial Trust, Mapletree Commercial Trust, Suntec Reit, Keppel Reit, Frasers Commercial Trust and OUE Commercial Reit.

The three best performers out of the six by return were Mapletree Commercial Trust (29.9 per cent), CapitaLand Commercial Trust (26.9 per cent) and Frasers Commercial Trust (26 per cent).

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Suntec Reit and Mapletree Commercial Trust also have both commercial and retail assets in their portfolios.

The office market in Singapore, which bottomed out in the first half of 2017, is now in its second year of recovery, and office rentals will likely continue rising amid tapering supply, according to a May 30 report by UOB Kay Hian Research.

Occupancy for Grade A office space in the core central business district (CBD) has seen a V-shaped recovery, rebounding to a healthy 95.2 per cent in the first quarter this year from the trough of 91.6 per cent in the third quarter of 2017, the report noted.

New supply for core CBD office space in Singapore is estimated at 5.33 million square feet (sq ft) between 2019 and 2022, representing an average of 1.36 million sq ft per year, 29 per cent below the 10-year average of 1.91 million sq ft, UOB Kay Hian Research added.

Likewise, in a June 21 report, Colliers International projected that rents for Grade A office buildings in the CBD will increase by 8 per cent this year and 5 per cent in 2020.

Colliers expects new supply in 2019-2021 to average 614,000 sq ft per year or 2 per cent of stock, versus 5 per cent over the past five years. This is anticipated to keep vacancies tight through 2021, the Colliers report said.

Colliers also noted that the growth of the technology, media and telecoms sector and the flexible workspace sector accounted for most of the net absorption of office space in 2018 and 2019 year to date.

The SGX said on Tuesday that S-Reits was the top net-buy sector in the first six months of this year, drawing net institutional inflows of S$396.3 million during the period.

In June, S-Reits was also the top net-buy sector, attracting inflows of S$223.1 million. It was previously the second top net-buy sector in May.

CapitaLand Commercial Trust topped June’s net-buy list, drawing inflows of S$58.6 million last month.

The SGX lists 34 Reits, seven stapled trusts and three property trusts, with a combined market capitalisation of more than S$100 billion.

Two of the stapled trusts – ARA US Hospitality Trust and Eagle Hospitality Trust – debuted on the bourse’s mainboard in May.