One of Cache Logistics Trust's maiden acquisition in Australia, 16-28 Transport Drive, Melbourne, Victoria.One of Cache Logistics Trust's maiden acquisition in Australia, 16-28 Transport Drive, Melbourne, Victoria.

Ratings agency Moody's Investors Service said on 20 January that it expects Singapore-listed industrial REITS to make more overseas acquisitions in 2016 amid challenging business conditions in Singapore.

"Industrial occupancy and rental rates in Singapore will remain under pressure in 2016, as new supply outpaces demand growth," said Rachel Chua, an analyst at Moody's Analyst. Chua made the comments in a Moody's report on Singapore industrial REITs titled ‘Industrial Real Estate Investment Trusts - Singapore: Industrial REITs Will Be Acquisitive in 2016’.

The report also highlighted the fact that domestic yields have fallen in the last few years, a trend that the agency does not expect to reverse in 2016-17.

“Specifically, rental yields for warehouses in Singapore declined to 2.5% in the third quarter of 2015 from 3.2% in early 2010, according to CBRE data, while net property income yields of Singapore REITS' recent overseas acquisitions have ranged between 5% and 10%”, said the report.

A number of Singapore-listed industrial REITs, including Ascendas REIT and Cache Logistics Trust, completed acquisitions of logistics assets in Australia in 2015.

“Looking ahead, Moody's expects the industrial Singapore REITs will continue to gravitate towards Australia in their acquisitions, given the country's stable and well-regulated real estate market. Industrial supply in Australia will also be underpinned by continued demand for logistic and distribution center space in 2016”, it added.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.