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Views From The Top: Sabana REIT, Sasseur REIT, Centresquare

February 3, 2021- Despite the rollout of vaccinations across the globe, a resurgence of Covid-19 infections and the discovery of new variants threaten to derail the global economy’s fragile recovery. REIT AsiaPac asked experts for their views on 2021.

Sabana REIT: Covid-led Challenges Persist

Donald Han, Chief Executive Officer of Sabana Real Estate Investment Management:

“Covid-19 and its devastating effects will continue to impact all segments of the real estate market in Singapore in the year ahead. The Ministry of Trade and Industry has estimated Singapore’s GDP growth to be a positive 4-6% this year, compared to a negative 5.8% in 2020, indicating light at the end of the tunnel. Still, recovery will be uneven, and companies will need to continue to adapt to a still fast-evolving and challenging situation. According to a recent Singapore Business Federation survey, seven in 10 of the firms hurt by Covid-19 say it will take at least a year to recover.

Industrial segment resilient, but headwinds remain

Relative to other segments of the real estate market such as hospitality, retail and office, the industrial segment – including manufacturing, logistics and warehousing facilities – has been relatively more resilient. Even during the Circuit-Breaker period last year, industrial properties performed comparatively better as many of their tenants were essential service providers.

However, there remain strong headwinds for the industrial property market. It is still a tenants’ market as businesses continue to explore how to optimise space usage and operating costs in the new normal. With construction restarting on many projects delayed last year due to the Circuit-Breaker and ample supply of space coming on stream over the near term, the segment also continues to be in an oversupply situation.

Ensuring sustainable value with Refreshed Strategy

As landlords, the key is to remain competitive. For Sabana REIT, we will continue to deliver our Refreshed Strategy to ensure sustainable value for Unitholders. This includes progressing on our asset enhancement initiative at our flagship New Tech Park; our new NTP+ mall has seen strong interest from tenants and will help us to grow and diversify revenue contribution when work on it completes in 1Q 2021. We are also undertaking rejuvenation at select assets, such as at 23 Serangoon North Avenue 5, to better meet the demands of current and prospective tenants and to ensure our properties stay ahead of the competition.

At the same time, we are recalibrating our portfolio and tenant mix to be more resilient. Key economic drivers are the electronic and biomedical industries. We are being selective and have onboarded multinational corporations (“MNCs”) from these sectors who are in expansionary mode. Already, we have secured new strategic life science and healthcare tenants at 3A Joo Koon Crescent and recently onboarded a major US electronic firm as an anchor tenant at 23 Serangoon North Avenue 5.”

Sasseur REIT: China Offers Potential

Anthony Ang, Chief Executive Officer of Sasseur Asset Management:

“China is expected to be the only major economy to have grown in 2020, thanks to its early recovery from the COVID-19 pandemic, and the Chinese government’s strategy of “dual circulation” to reduce dependence on exports and drive domestic spending.

China is the largest luxury goods market in the world, and with many locals unable to spend on luxury goods outside of China due to COVID-19-related travel restrictions, the domestic spending on luxury goods has surged. This will benefit Sasseur REIT’s malls as our main customers are the homegrown middle-class, who remain the main drivers of domestic demand outlets. 

Sasseur REIT continues to source and evaluate potential investment opportunities that are yield-accretive. In 2020, Sasseur REIT’s sponsor – Sasseur group opened two new outlets in Yangzhou and Xiamen, bringing the total number of outlets operated by Sasseur group to 13, with 4 in the REIT portfolio. This expansion will provide a strong pipeline for the future growth of Sasseur REIT. ”

CenterSquare: Office Space Seen Adapting

Joachim H. Kehr, Portfolio & Regional Manager Asia-Pacific:

“Beyond accelerating existing trends, we don’t believe that Covid has materially altered the outlook for real estate markets. Retail in markets like Singapore and Australia is currently benefitting from easing lockdowns and stimulus-funded consumers, but the threat of e-commerce to brick-and-mortar retailers has increased over the past 12 months. The fortunes of retail assets catering to discretionary spending remain bleak if not bleaker than pre-Covid.

On the flip side, the secular tailwind that propelled logistics and data centres prior to Covid has strengthened over the past year. These sectors offer little investment upside in the near-term, given they will not benefit from an economic reopening as much as others, but longer-term their prospects remain very much intact.

Finally, office will not face long-term structural headwinds from remote working. While we all will enjoy more flexible work environments and might work from home or some other remote location more often in future, office space will have to remain flexible to adapt to changing usages. A prolonged and material reduction in office space usage beyond the current recession is unlikely.”

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