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29 March 2022

Are S-REITs pressured by inflation and high oil prices?

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Inflation pressures due to supply bottlenecks and the current Russia-Ukraine crisis are expected to drive global energy prices higher. Singapore’s energy costs will also spike as a result, and most S-REITs as landlords will not be spared as utility and maintenance costs are expected to rise.

Seeking safe havens

What does this mean for your portfolio?

We believe S-REITs’ ability to continue growing revenues strongly at around 20% in 2022 will be a key mitigator to the rise in operational costs. Who is most shielded and where should investors hide?

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We like these:

Warehouse sector

The warehouse sector is the most shielded from the rise in operational costs, given their efficient footprint, and we see the least downside to earnings. Overall, even with these rising cost pressures, we estimate the sector can still deliver a growth of 7.4%, with sector yields still attractive at around 6%.

Among warehouse REITs, we like Frasers Logistics & Commercial Trust, and Mapletree Industrial Trust, Mapletree Logistics Trust.

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