Ascendas Reit posts 3.7% rental reversion in Q3, expects single-digit positive figure for full year

ASCENDAS real estate investment trust (Reit) posted a positive rental reversion of 3.7 per cent for lease renewals in Q3 ended September, down from 8.9 per cent in Q2, it announced in a quarterly business update on Tuesday.

It expects rental reversion for FY2021 to be in the "positive low-single-digit range", given market uncertainties. In the year to date, rental reversion stands at 5.4 per cent.

The Reit manager is cautious about leasing sentiment in Singapore and the US, even though the global outlook for this year is brighter than last year. Its portfolio occupancy rose slightly to 91.7 per cent at the end of Q3, compared with 91.3 as at end-June. Overall weighted average lease expiry (WALE) stands at 3.8 years.

Occupancy in Singapore came in at 88.5 per cent for the quarter, up from 87.9 per cent as at end-June. This was mainly due to the handover of Grab's headquarters to the tech company in July.

There was also higher occupancy at a logistics property, 21 Changi South Avenue 2, from 36.1 per cent in end-June to 100 per cent at the end of September. Two of the Reit's industrial properties, Techplace I and 9 Woodlands Terrace, also enjoyed higher occupancy.

However, leasing demand in Singapore is expected to "stay relatively muted" as most companies are careful with expansion plans. The Reit is still optimistic about demand from "new economy" sectors such as biomedical sciences and information and communications technologies.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The US market recorded some weakness, with occupancy dipping to 91.4 per cent at the end of September, from 92.8 per cent in end-June. The portfolio was hit by lower occupancy at Perimeter Three, a business space in Raleigh, North Carolina.

Leasing activity there is expected to remain slow, "as companies evaluate their real estate footprint post-pandemic".

Nevertheless, the Reit's S$2.1 billion in investments in the country is "underpinned by the good locations of its properties within key US technology cities, its long WALE of 4.8 years and the high proportion of leases with rent escalation clauses of between 2.5 per cent and 4.0 per cent per annum", said the Reit manager.

Other markets are seeing a healthy outlook. In Australia, occupancy improved to 97.5 per cent from 95.8 per cent in end-June. This arose from a new lease secured at a Sydney logistics property, 1 Distribution Place, as well as the divestment of a Brisbane logistics property, 62 Stradbroke Street.

The Australian portfolio "continues to deliver stable performance", with a WALE of 3.6 years and average rent escalations of approximately 3 per cent per annum, the Reit manager said.

Three properties are expected to be completed in the next year: two logistics properties in Sydney and Brisbane, and one suburban office property in Sydney. This will bring the Reit's total investment in Australia to S$2.4 billion.

In the UK and Europe, strong e-commerce adoption and digitalisation are expected to support demand for logistics and data-centre space. Occupancy there was unchanged from the previous quarter at 98.2 per cent.

The Reit's UK and Europe portfolio stands at S$1.8 billion, with "a long WALE of 5.7 years, which will mitigate any uncertainties".

The Reit manager said that it will "continue to exercise prudence, maintain a strong balance sheet and proactively manage its S$16 billion portfolio to deliver sustainable returns for its unitholders".

Units of Ascendas Reit closed flat at S$3.01 on Tuesday.