The Singapore skyline, showing Singapore's most prominent properties. (Photo: REITsWeek)

OCBC Investment Research has downgraded the overall Singapore REITs sector from ‘Overweight’ to ‘Neutral’, citing the country's challenging lease environment, and prevailing macroeconomic conditions globally.

In an investment report issued on 23 March, OCBC pointed to key economic data coming out of the United States, which suggest the likelihood of faster-than-expected interest rate hikes by the Federal Reserve.

As such, OCBC projects softer DPU growth for Singapore REITs in FY2017.

“While we believe Singapore REITs still warrant a strategic position in investors’ portfolio in light of uncertainties surrounding the geopolitical and macroeconomic environment, valuations are no longer compelling, in our view”, said the bank, adding that it recommends investors to be selective.

OCBC listed Keppel DC REIT, Frasers Centrepoint Trust, and Frasers Logistics & Industrial Trust as its preferred list of REITs that still feature ‘Buy’ recommendations from the bank, despite the downgrade on the sector as a whole.

Fair value estimates for the counters have been listed as SGD1.39, SGD2.28 and SGD1.08 respectively.

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.