Why REITs are busy snapping up industrial property

REITs can't help but accumulate "yield accretive purchases" while interest rates remain attractively low.

In fact, REITs seem to brush aside concerns of falling rentals and global economic headwinds for the chance at squeezing the most out of the current low interest rates.

"Notwithstanding the global uncertainties and the near-term pressure on rents, REITs took advantage of the low interest rate environment to secure yield accretive purchases," said Colliers in its Asia Pacific Industrial Market report.

"For example, in February 2012, Ascendas REIT bought four high-specs buildings located in the Singapore Science Park -- Cintech I, II, III and IV -- for a collective sum of S$183.00 million. This comes shortly after their announcement in December 2011 that they have acquired two properties, namely Corporation Place at 2 Corporation Road and 3 Changi Business Park Vista for a combined S$179 million," it added.

Colliers also pointed to other recent REIT purchases such as Cambridge Industrial Trust's buy of a factory located on 16 Tai Seng Street for S$59.25 million as well as a warehouse at 3C Toh Guan Road East for S$35.5 million.

Cache Logistics Trust has also purchased Pan Asia Logistics Centre on 21 Changi North Way for S$35.18 million.

Colliers noted that the robust demand from REITs has helped arrest the declining growth of land and capital values.

"These supported the continued uptrend in land and capital values albeit at a slower pace of between 5.1% and 13.5% during the current review period, down from 10.0% to 16% in the previous review period," said Colliers.

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