Business

Future looks good for industrial Reits

Industrial real estate investment trusts (Reits) will likely benefit as the Government pushes for more higher-value-add businesses, said a report yesterday.

The boost for Reits will be underpinned by the new economy, which is expected to boost demand for hi-specifications factories and business park space even as the current supply glut tapers off.

Maybank Kim Eng analyst Chua Su Tye noted that the industrial sector - having digested the effects of policy measures similar to those in the residential market - is approaching the tail-end of a supply surge that has been in place since 2014.

"Supply surplus, which has plagued sector dynamics, should abate in 2018 as demand looks set to exceed new completions," said Mr Chua. He added that rents will likely bottom out this year and recover in the next, helped in part by growth in the manufacturing sector.

"Singapore's economic remodelling efforts should steer industrial demand needs towards hi-specs factories and business parks," he said, pointing to the Government's deliberate efforts to prioritise new economy industries - such as e-commerce, technology research and development, data centres - over traditional manufacturing.

Separately, an earlier report by RHB noted that recent economic data is pointing to steady growth in the manufacturing sector, which augurs well for industrial demand.

"While supply pressures remain as an overhang, a pick-up in demand ensures that rentals and capital values are unlikely to decline sharply," said RHB analyst Vijay Natarajan.

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