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3 Important Things That Investors Should Know About Singapore’s Retail REITs

If you like having a regular dividend in your pocket, consider real estate investment trusts (REITs).

Thankfully, Singapore is home to some of the region’s largest and most established REITs. Each REIT has a specific investment mandate, and specialises in investing in certain classes of real estate. One of the largest REIT categories is retail, which boasts 11 retail REITs worth a total market capitalisation of about S$25 billion listed in Singapore.

Here are three key things investors should know about retail REITs in Singapore.

Singapore-focused retail REITs have outperformed the broader market so far this year

According to an article by Singapore Exchange Limited (SGX: S68), four SGX-listed retail S-REITs – namely CapitaLand Mall Trust (SGX: C38U), Mapletree Commercial Trust (SGX: N2IU), SPH REIT (SGX: SK6U) and Frasers Centrepoint Trust (SGX: J69U) have outperformed the broader market so far in 2018. The quartet averaged a total return of 4.0% so far this year, outperforming the Straits Times Index  (SGX: ^STI) by 5.6 percentage points; The index has declined 1.6% year to date.

Retail rents in the central areas of Singapore may recover soon

Retail rents in the central and fringe areas have been relatively weak since 2015, partly due to competition from e-commerce and changing consumer spending behaviour.

In the first half of 2018, central region rent slipped 1.7% on year. However, recent developments suggest that this downward trend could turnaround soon. Rising tourism is expected to help boost tenant sales, with the ground floor rents on the Orchard Road shopping area most likely to benefit. Colliers International expects the gradual recovery of Orchard Road rentals from 2018 to 2022, with ground floor rents leading the turnaround.

China retail REITs declined 2.2% This year.

With the addition of Sasseur Real Estate Investment Trust (SGX: CRPU) in March this year, there are now four China-focused retail REITs in Singapore. CapitaRetail China Trust (SGX: AU8U), Dasin Retail Trust (SGX: CEDU) and BHG Retail REIT (SGX: BMGU) are the other three.

For the year thus far, these four REITs have returned a negative total return of 2.2%. Possible reasons for the weak performance include fears over impending interest rate hikes and trade war implications.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn't owns shares in any companies mentioned. Motley Fool Singapore has recommendations for CapitaLand Retail China Trust, CapitaLand Mall Trust, Singapore Exchange, Mapletree Commercial Trust and Frasers Centrepoint Trust.