Chart of the Day: Almost 500% spike in Singapore’s 2014 warehouse supply to pressure rental rates

Coupled with stagnant demand.

2014 will expect an influx of both business park and warehousing space to impact occupancy rates for industrial REITs, limiting EBITDA growth for the segment. Nonetheless, the segment’s larger asset base is expected to lead to 3%-5% growth in EBITDA over the next 12-18 months.

According to a report by CBRE, within the industrial segment, we expect rental rates for warehousing space to slip because of the surge in supply.

CBRE’s two rated S-REITs in the warehousing sub-segment, Mapletree Logistics Trust (Baa1 stable) and Cache Logistic Trust (Baa3 stable), are most exposed to the risk of rising vacancies and falling rental rates, as growth in demand continues to lag supply. However, CBRE estimates at least 60% of total upcoming warehouse space has been pre-committed by end users. CBRE does not expect either trust to see a material decline in operating income because both trusts are protected by their long weighted average lease expiry profiles of approximately 3.8 years to 4.6 years, and both have a track record of proactive lease management.

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