Singapore’s Suburban REITs Poised for Growth Next Year
SINGAPORE’S suburban real estate investment trusts (REITs) are poised for growth next year, although there is a temporary risk in the form of retail business flowing to Johor Bahru (JB) by way of the Rapid Transit System (RTS) connecting the two cities, said DBS.
Suburban Retail has More Catalysts than Risks
In a Dec 16 report, DBS Group Research analysts Geraldine Wong and Derek Tan said that suburban retail has “more catalysts than risks”, and offers “strong growth prospects” for 2025. They continue to prefer the sector “given clearer organic growth visibility” on the back of “a strong macro-landscape for Singapore next year”.
RTS Connection to JB a Development to Watch
However, the Singapore-JB RTS is a development to watch – it is also an “overhyped risk” to suburban retail, the analysts said.
Noting that the RTS will “ease the connection between Singapore (and) JB in Malaysia”, they pointed out “concerns about heightened retail leakage, similar to (the) shift in retail spend from Hong Kong to Shenzhen”.
Impact of RTS on Singapore’s Retail Sector
The cross-border project is slated to begin operations in December 2026 and will have the capacity to serve 10,000 passengers an hour in either direction, with the journey taking about five minutes.
Based on average spending of S$100 to S$141 per person per day in JB, DBS estimates an additional “retail leakage” of S$1.8 billion from Singapore each year. That is 3 per cent of total retail value, said the bank.
DBS’ View on the Temporary Impact of RTS
However, the lender expects this to be temporary. “Over time, we anticipate that shopping leakage to JB will be more of a fad than a lasting trend, and will be highly dependent on the maintenance of pricing differentials between the two borders.”
Top Picks in the Suburban Retail Space
DBS’ Top Picks in the Suburban Retail Space
DBS’ top picks in the suburban retail space are Frasers Centrepoint Trust (FCT) and CapitaLand Integrated Commercial Trust (CICT).
The bank favours CICT for its “commanding position within Singapore retail”.
Meanwhile, FCT’s “forward yields of 6.1 per cent at levels ‘too good to be true’” as well as its status as “a top beneficiary of a turn in interest costs” make the Reit a top sector pick, Wong and Tan said.
Conclusion
In conclusion, DBS expects Singapore’s suburban REITs to experience growth next year, driven by strong demand-supply dynamics and the sector’s attractive price-to-book ratio. While the RTS connection to JB may pose a temporary risk, the lender expects this to be a passing trend.
FAQs
Q: What are the key drivers of growth for Singapore’s suburban REITs?
A: Strong demand-supply dynamics and attractive price-to-book ratio are the key drivers of growth for Singapore’s suburban REITs.
Q: How will the RTS connection to JB impact Singapore’s retail sector?
A: The RTS connection to JB is expected to lead to temporary retail leakage, but DBS expects this to be a passing trend.
Q: Which REITs are DBS’ top picks in the suburban retail space?
A: DBS’ top picks in the suburban retail space are Frasers Centrepoint Trust (FCT) and CapitaLand Integrated Commercial Trust (CICT).
