Green shoots for retail and hospitality S-Reits amid new pandemic phase

SINGAPORE has announced simplified safe management measures as well as new vaccinated travel lanes (VTL) and increased VTL quotas as the country enters a new phase of dealing with the pandemic and is streamlining border measures.

Alongside the calibrated re-opening of borders and economy in the region, Asean countries with relaxed border controls saw international flight bookings increase significantly in Jan 2022. Countries such as Indonesia, the Philippines, Singapore, and Thailand also saw return economy-class bookings from travellers in the United Kingdom, United States and Germany rise 19 per cent to 300 per cent month on month in January, according to data from Skyscanner. Skyscanner also expects airlines to announce new schedules and build capacity to facilitate the return of international travel at scale.

In Singapore, Changi Airport passenger movement data has also seen upticks over the past 3 months. More notably, passenger volumes in December 2021 grew over 120 per cent month on month, building on from the 55 per cent month-on-month increase seen in Nov 2021. Despite being just at 15.3 per cent of pre-Covid monthly levels of about 5.7 million (on average across 2017 to 2019), the implementation of VTLs locally have had a positive impact.

As Singapore's border progressively re-opens and the country moves into a new phase of the pandemic, investors' focus may shift towards stocks which potentially benefit from increased international travel, and retail and consumer spending.

Listed on the SGX are 12 S-Reits and property trusts which have significant exposure to Singapore related retail and hospitality assets.

All 12 trusts generated positive returns in the February month to date, averaging 6 per cent total returns.

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In the month to date, the top 5 performing retail and hospitality related S-Reits averaged 9 per cent total returns (and 4.8 per cent average total returns on a year-to-date basis). They are CDL HT J85 (10.7 per cent total returns), CICT C38U (10 per cent), Far East HT Q5T (9 per cent), Suntec Reit T82U (8.8 per cent) and Frasers HT ACV (6.7 per cent).

The 5 saw a combined institutional net buy of S$67.5 million in the year to date.

Far East Hospitality Trust reported 28.8 per cent and 23.4 per cent quarter-on-quarter increases in revenue per available room/unit in their hotels and serviced residences respectively in Q42021, citing long-stay corporate sources and loosening of travel restrictions as providing a boost to the hospitality industry.

Frasers Centrepoint Trust J69U noted that its portfolio tenants' sales exceeded pre-Covid levels in December 2021 and shopper traffic recovered following the easing of Covid restrictions.

Cessation of work from home (WFH) as the default mode from January 2022 is expected to gradually increase shopper traffic.

Suntec Reit reported higher occupancy rates for its retail properties and noted that tenant sales recovered faster than footfall and exceeded pre-Covid levels in December 2021.

Management expects recovery to be further driven by the return of office workers and easing of safe management measures extended to events. SGX RESEARCH

For more research and information on Singapore's Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook.

Source: SGX Research S-Reits & Property Trusts Chartbook.