Local retail S-Reits see gradual recovery in tenants' sales

EIGHT out of the 43 Reits and property trusts listed in Singapore (S-Reits) are classified as retail S-Reits. Retail S-Reits own and manage retail real estate, including shopping malls, outlet malls and grocery-anchored strip malls among others. These eight have a combined market capitalisation of close to S$1.3 billion and an average dividend yield of 6.6 per cent.

In terms of asset portfolio, the eight retail S-Reits are geographically diversified across Singapore, China, Malaysia, Indonesia, Japan, Australia and the United States. A detailed geographical breakdown of eight retail S-Reits can be found in the table.

Of the eight, there are three retail S-Reits with significant exposure to the local retail market. The three retail S-Reits with assets in Singapore are Frasers Centrepoint Trust, SPH Reit and Starhill Global Reit. Frasers Centrepoint Trust is the only pure-play Singapore retail Reit which invests exclusively in Singapore properties.

In the 2021 year to date (YTD) till Feb 4, Starhill Global Reit and Frasers Centrepoint Trust emerged as the two best performing retail S-Reit with 7.7 per cent and 6.1 per cent total returns respectively. Together, the two retail S-Reits garnered net institutional inflows of S$12.4 million in the 2021 YTD till Feb 4 period.

Singapore's total retail sales in December 2020 dipped 3.6 per cent year on year, steeper than the 1.7 per cent decline in November 2020, which was boosted by shopping events such as Singles' Day and Black Friday sales. Gradual recovery in retail sales was seen over the last quarter of 2020 as Singapore entered into Phase 3 of Covid-19 reopening. Retail sales rebounded from a year-on-year decline of 10.6 per cent in September 2020 to a decline of 3.6 per cent in December 2020.

In line with the gradual rebound in Singapore's retail sales, Frasers Centrepoint Trust, in its latest business updates for the quarter ended Dec 31, 2020, noted that portfolio occupancy remained resilient at 96.4 per cent and total tenants' sales have recovered to near pre-Covid-19 levels. The year-on-year growth of its portfolio tenants' sales was -1.8 per cent, +1.5 per cent and -1.3 per cent for October, November and December 2020 respectively.

Frasers Centrepoint Trust, which has a portfolio of suburban retail malls in Singapore, also noted that the easing of Covid-19 control measures in Phase 3 (for example increase in mall capacity and dining group size) is expected to be positive for retail performance. It plans to focus on tenant trades such as necessities and essential services (for example, food and beverage) and leverage on a combination of physical and digital retail offerings to strengthen the relevance of its malls.

Starhill Global Reit, whose asset portfolio spans Singapore, Australia, Malaysia, China and Japan, reported a year-on-year decline of 12.3 per cent in net property income for H1 FY20/21 but saw recovery trends in tenants' sales. The Reit noted that tenant sales at Wisma Atria recovered gradually to about two-thirds of pre-Covid-19 levels in H1 FY20/21 following Phase 2 and Phase 3 reopening in Singapore. As part of its overall re-positioning strategy for Wisma Atria, it will be strengthening its food and beverage offerings and enhancing its appeal as a premier lifestyle mall. 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.