Chart of the Day: More pain ahead for Industrial REITs under threat as occupancy hits record low

Rents and margins are under threat.

Industrial landlords in Singapore will face steadily shrinking profit margins as occupancy sinks to a record low, according to a report by CIMB.

This chart shows that the supply of available space will spike this year, while demand is expected to stay lacklustre as tenants grapple with slowing trade and intensifying economic headwinds.

"For the quarters ahead, we see heightened vacancy risks for logistics trusts which could turn into lower rental rates and margin pressure," said CIMB.

For instance, 10.9% of Cache Logistics Trust's leases is due for renewal this year, while 20.2% of Cambridge Industrial Trust's leases are due to expire in FY16.

“At this juncture, we sense that the likelihood of renewal is low. Underlying performance of the logistics trusts was not encouraging in 1Q16. We foresee earnings pressures for the logistics trusts as vacancy risks increase. Moreover, the NPI margins of logistics trusts continue to remain under pressure due to ongoing MTBs (multi-tenanted building) conversions,” CIMB said.

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