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Why Consider Retail REITs (21% Return In Past Year)
Perspective | 09 March 2015
By: Peter Ng
Articles (81) Profile

2014 has been a year of yield plays. Continuing its strong momentum last year, the FTSE ST Real Estate Investment Trusts (REIT) Index outperformed the Straits Times Index (STI), gaining 3.3 percent versus STI’s 1.1 percent in the first two months of the year. Given the variety, which class of REIT should investors consider?

Healthcare and hospital real estate investment trusts (REIT) are likely crowned as the most earnings resilient within the REIT asset class due to their exceptionally long leases.

While lease duration may rarely stretch into the double digit territories unlike its healthcare counterparts, retail REITs are also worthy contenders when it comes to resilience.

This is because shopping malls are almost the epicentre of convenience, whether it is for grocery shopping, dining or as simple as a casual meet up with family or friends, they are able to meet these needs all at once.

In addition, when it comes to dwelling in a country like Singapore where space is tight, this puts a constraint on the type and amount of outdoor recreational activities that we can do here.

According to a lifestyle survey published by the Urban Redevelopment Authority of Singapore, apart from dining out (which can be done in shopping malls anyway), shopping for leisure or window shopping is ranked as the second highest out of all other social and cultural activities.

Although there are only eight retail REITs out of 28 REITs listed on the Singapore Exchange as at 9 March 2015, however, eight is still a considerable number of options where investors would have to evaluate before they can determine whether these REITs are ideal investments.

Here are the four things to look into in a retail REIT.

Check out our very own investment blueprint of a retail REIT, CapitaMall Trust, which is the largest REIT in market capitalisation on the Singapore Exchange.
Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

Please click here for more information about this author.

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