Retail REITs: An article on BT today highlighted that Singapore is the second hottest target market in the world for global retailers, according to a recent study by research firm CBRE.
Food and beverage operators were the most active with expansions, followed by retailers of mid-market apparel and accessories such as sports goods, ladies fashion, footwear and handbags.
The study also found that the Orchard Road strip continues to be the most popular shopping location for retailers.
To recap, retail REITs generally reported a stronger y/y result in 1Q15, mainly due to the timing of Chinese New Year in late Feb, giving malls a longer runway for pre-CNY sales.
Despite the sector's resilience however, the street is generally not positive on the segment given the structural headwinds, which includes deteriorating retail data, sluggish sales growth and labour shortages.
We opine that investors should remain selective on the counters, choosing those with the potential for upward rental reversion and the ability to capture the return of tenant sales (when it returns).
As a guide, retail REITs that derive a portion of revenue from the Orchard Road region are Starhill Global, Capitamall Trust and SPH REIT, as well as property developer Wheelock properties.
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