Suntec Reit sees subdued retail sales, expects office, retail tenants to hold off expansion plans

[SINGAPORE] Office and retail tenants are expected to hold off on their expansion plans amid uncertainty over the impact of US tariffs, said the manager of Suntec Reit .

Speaking at the real estate investment trust’s (Reit) financial results briefing for Q1 on Friday (Apr 25), Dawn Lai, chief operating officer of the manager, said that tenants have “become more cautious” as they are uncertain about the impact of the US’ tariffs.

“We expect (expansionary tenants’) decisions to be a bit more prolonged and delayed, and maybe they would decide to hold (expansion) off for a while,” she said.

Suntec Reit’s Singapore office assets posted a rental reversion of 8 per cent; its Singapore retail assets posted a rental reversion of 10.3 per cent for Q1.

The manager said that there is no change to its rental reversion guidance for these assets for the upcoming quarter.

Its rental reversion for office assets is projected to be between 1 and 5 per cent, while that for its retail assets has been pegged at between 5 and 10 per cent.

The unchanged guidance reflects the manager’s cautious outlook for the year.

Q1 results

The briefing was held a day after Suntec Reit posted its financial results for the first quarter ended Mar 31, 2025.

The Reit’s distribution per unit rose by 3.4 per cent to S$0.01563 for Q1, up from S$0.01511 in the same period a year earlier.

Revenue was up 3.4 per cent at S$113.5 million for the quarter, from S$109.8 million in the corresponding period in the previous year.

Distributable income also improved by 4.3 per cent due to the better performance and lower financing costs, it added.

The Reit’s Singapore office, retail and convention portfolios, as well as the UK portfolios, continued to deliver strong operating performances, noted the manager on Thursday.

Effect of tariffs to take time to show

Specific to Suntec Reit’s office tenants, Lai said that decisions by tenants to relocate an office or to terminate a lease early will take time to be put into action.

“So we will probably not see the effect so soon,” she said.

She added that there continues to be inquiries for smaller office spaces under 5,000 square feet. The demand for smaller spaces is driven mainly by non-bank financial service firms such as wealth management and hedge fund companies.

Lower discretionary spending expected

As for its retail segment, the Reit manager said that retail sales is likely to stay subdued due to cautious consumer spending. Retailers are also projected to adopt a cautious expansion strategy amid the weaker economic outlook.

Chong Kee Hiong, the chief executive officer of the Reit manager, said that discretionary spending will be “the first to be hit” as a result of the tariffs.

For instance, consumers may cut back on items like apparel, or eat at food courts rather than restaurants.

Nevertheless, Chong said that the Singapore dollar could soften in the coming months, making it more expensive for consumers to spend overseas. This could have a positive effect on retail sales in Singapore in the coming months.

Convention centre’s performance to stay stable

In its outlook for the convention centre sector, the manager said that the uncertainty caused by the tariffs may force event organisers to tighten their budget for conferences. This may result in lower attendance for events.

However, Chong said that the manager has yet to observe any signs of the sector’s performance weakening due to the tariffs. No conference organiser has asked to delay or downsize their conferences because of the tariffs. There are also no signs, so far, that attendance would be affected, he said.

He expects performance for the Reit’s convention segment to remain stable this year.

The counter closed S$0.01 or 0.9 per cent lower at S$1.15 on Friday.