Ascendas REIT to see weak rental reversion in FY17, say analysts

Passing rents for renewed spaces are close to market rents.

Ascendas REIT (AREIT) may have clinched positive rental reversion in the third quarter of FY16, but analysts say the same may not be true in FY17.

CIMB noted in a report that AREIT will likely see low-single digit rental reversion in the next financial year as the average passing rents for space due for renewal in FY17 are close to market rents.

On the flip side, the proposed acquisitions of One@Changi City in Singapore for $420m, and 6-20 Clunies Ross Street in Australia for A$76.6m should be finished by the end of CY16’s first quarter. Luckily for AREIT, the deals should contribute to earnings from FY17 onwards.

AREIT sees One@Changi to generate a net property income (NPI) yield of 5.9%. Also, 92% of its leased space is about 14% below market

Meanwhile, Clunies is expected to generate an initial NPI yield of 6.6%, with in-built step-up of 3.5 to 4% per annum.

CIMB further notes that among industrial sub-segments, business parks would likely stay robust, with an absence of new completions after 2016 as well as increased pre-leasing levels.

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