Singapore retail space vacancy rose to 7.7% in 1Q17 despite a 2.9% QoQ decline in price rentals. However, impact of retail headwinds may not be evenly felt across all malls.
New supply of retail malls largely located in Outside Central Regions, in line with the government’s plan of decentralised business districts and growth of regional centres.
SGX lists 12 Retail REITs & Property Trusts which have retail properties within their asset portfolios with a combined market capitalisation of S$30.9 billion. These 12 trusts have generated a market cap weighted average total return of 16.2% in the YTD and have an average dividend yield of 6.1%.
Real Estate Sector Sub-Segment: Retail Property Market
Structural challenges in Retail sector as e-commerce disrupts
According to the Urban Redevelopment Authority’s (URA) latest data, vacancy rates for Singapore retail space rose to 7.7% in 1Q17 (from the low of 4.5% in 4Q13) despite a 2.9% QoQ decline in price rentals. Local retailers are also seeing lower shopper traffic and sales volumes as e-commerce grows in Singapore. A Paypal consumer research study last year showed 73% of Singaporean online adults shopped online in 2016, spending an estimated amount of about S$3 billion online. Additionally, e-commerce giant Amazon Inc. is reportedly launching its services in Singapore as part of its push into Southeast Asia (click here), putting more pressure on traditional retail.
DBS Vickers Securities believes that the impact of retail headwinds will not be felt evenly across all retail malls, and investors should look towards malls with a good location, strong track record of recurring footfall and tenant sales, active asset management and advertising and promotion efforts.
Decentralisation of new supply into suburban retail malls
New retail space supply is expected to peak next year with an added 258,000 sqm worth of retail space to be completed in 2018. A supply spike may add further pressure on rental and occupancy. However, new supply has largely been located from Outside Central Regions (examples include the completed Punggol Waterway Point, Changi Jewel, and Paya Lebar Quarter), reflecting the government’s push towards a live, work and play concept in regional centres and decentralised business districts. In addition, many retailers previously only located in Orchard Areas are moving into suburban shopping malls to cater to needs of residents living in those areas.
For more, please refer to the SGX Real Estate sector presentation.
SGX’s Cluster of Retail REITs & Property Trusts
SGX lists 12 Retail REITs & Property Trusts which have retail properties within their asset portfolios with a combined market capitalisation of S$30.9 billion. It is one of SGX’s largest REIT sub-segment by market capitalisation.
These 12 trusts have generated a market cap weighted average total return of 16.2% in the year-to-date, with an average dividend yield of 6.1%, and average gearing of 32.5%. The five best performers in the year-to-date are Croesus Retail Trust (+48.6%), Lippo Malls Indonesia Retail Trust (+31.2%), CapitaLand Retail China Trust (+21.5%), Suntec REIT (+19.7%) and Mapletree Commercial Trust (+19.6%).
The table below details the Retail REITs & Property Trusts sorted by market capitalisation:
|Name||SGX Code||Market Cap S$M||Price S$||Total Return YTD %||Total Return 1 Yr %||P/B||P/B 5 Yr Avg||Gearing %||Dvd Ind Yld %|
|Capitaland Mall Trust||C38U||7,268||2.050||11.9||-1.6||1.1||1.1||31.3||5.4|
|Mapletree Commercial Trust||N2IU||4,660||1.620||19.6||15.6||1.2||1.1||36.4||5.3|
|Frasers Centrepoint Trust||J69U||1,973||2.170||17.6||3.8||1.1||1.1||30.0||5.4|
|Starhill Global REIT||P40U||1,712||0.790||9.6||4.0||0.9||0.8||35.2||6.4|
|Capitaland Retail China Trust||AU8U||1,422||1.610||21.5||7.1||1.0||0.9||36.0||6.2|
|Lippo Malls Indonesia Retail Trust||D5IU||1,313||0.470||31.2||37.3||1.2||1.0||31.8||7.5|
|Croesus Retail Trust^||S6NU||919||1.190||48.6||50.8||1.3||0.9||46.2||5.6|
|Dasin Retail Trust^||CEDU||440||0.800||0.0||N/A||N/A||N/A||25.7||8.5*|
|BHG Retail REIT||BMGU||366||0.740||16.5||15.8||0.9||N/A||27.5||6.8|
|Market Cap Weighted Average||16.2||10.3||1.0||1.0||32.7|
Note 1: ^ denotes property trusts.
Note 2: Suntec REIT and Croesus Retail Trust are not classified within the Retail REITs GICS® Sub-industry but have retail properties in their portfolio. The remaining 10 are classified under the Retail REITs GICS® Sub-industry.
Note 3: *Dasin Retail Trust listed on 20 Jan 2017, dividend yield of 8.5% is a forecast for 2017 (for initial portfolio and Shiqi Metro Mall) based on the IPO Prospectus
Source: SGX, Bloomberg & SGX StockFacts (data as of 26 July 2017)
Some key highlights of recent earnings releases are listed below:
Frasers Centrepoint Trust
- Distribution per Unit (DPU) of 3.00 cents (S$) declared for 3Q 2017, bringing 9M 2017 DPU to 8.93 cents (S$).
- Unitholders’ distribution for 3Q 2017 was at S$27.7 million, 1.0% lower YoY, and portfolio occupancy rate at end 3Q 2017 was 87.1% (end 2Q 2017 was 87.2%).
- Frasers Centrepoint Trust recognises that the general retail sector continues to face structural challenges, but expects its malls to remain resilient. It also expects Northpoint shopper traffic to improve towards completion of its asset enhancement works in September 2017. Click here to read more.
CapitaLand Mall Trust
- DPU of 2.75 cents (S$) declared for 2Q 2017, bringing 1H 2017 DPU to 5.48 cents (S$).
- Unitholders’ distribution for 2Q 2017 was at S$97.2 million, 0.1% higher YoY, and portfolio occupancy rate at end 2Q 2017 was 98.6%.
- CapitaLand Mall Trust plans to focus on active lease management for the remaining 327 leases due for renewal in 2017 and unlocking value through asset enhancement initiatives such as Raffles City and Funan. Click here to read more.
- DPU of 1.37 cents (S$) declared for 3Q 2017, bringing the YTD 3Q 2017 DPU to 4.11 cents (S$). Annualised distribution yield of 5.5%, based on closing price of S$1.00 on 31 May 2017.
- Unitholders’ distribution for 3Q 2017 was S$35 million, 1.2% higher YoY, and portfolio occupancy rate at end 3Q 2017 was 100% for both its malls (Paragon and The Clementi Mall).
- SPH REIT aims to continually optimise tenant mix of its properties, implement asset enhancement initiatives and pro-active marketing plans, and explore acquisition opportunities that will add value to the REIT’s portfolio. Click here to read more.
Previous Market Updates on the Real Estate Sector
- 6 July 2017: SGX Real Estate Index Returned 19.5% YTD on Positive Indicators – Click here
- 13 July 2017: Singapore Private Property Market Shows Signs of Stabilising – Click here
- 14 July 2017: Green Shoots Emerge Despite Challenging Industrial Property Market – Click here
- 20 July 2017: Singapore Office Property Market Stabilising Despite Headwinds – Click here
- 21 July 2017: Recent Trends & Moves in Singapore’s Hospitality Trusts – Click here
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