Guess which S-REITs segment is highly at risk to spiking interest rates

And a recalibration of property prices.

According to Maybank Kim Eng, the industrial REITs returned -6.5% YTD and underperformed the STI Index by 5.1%.

Maybank sees Industrial REITs facing the most downside risk to impending hikes in interest rates and the possible recalibration of over-inflated property prices – which can drag down NAV.

Here's more:

The physical capital values of industrial properties have doubled in four years, compared to other segments which have appreciated only 20%-50%.

Its price-rental mismatch has also proved the most staggering. Rentals are at all-time high levels from 2008 peaks and we think FY14 rentals will start to experience slowing growth.

Other challenges for industrial REITs include a fragile global macroeconomic outlook and ample supply in the pipeline. In the medium term, Iskandar Malaysia will be a competitor, especially for lower value-added industrial activities within Singapore.

Empirical evidence suggests that warehouse rents and asset values in Singapore are respectively 2.5x and 8.5x higher than in that of Iskandar Malaysia.