Reits

Reits: Deutsche released its 1Q results review, citing continued operational challenges for the sector.

While most of the REITs were able to report positive rental reversions, this came at the expense of deteriorating occupancies. The net effect has resulted in near-zero organic growth for the sector.

Despite the difficult underlying market, the sector has still outperformed the FSSTI Index by 2% YTD on the back of a moderated expectation of rate rise and the continuous fund inflow.

With increasing headwinds including weak physical market outlook and rising borrowing costs, house expects the outperformance to reverse. DB prefers REITs with strong organic and inorganic growth; CapitaMall Trust and Keppel DC REIT are its top picks.