Office, industrial REITS segment steady amidst pandemic
KUCHING: Hong Leong Investment Bank Bhd ( HLIB Research) saw that Malaysia’s office and industrial real investment estate trusts ( REITs) fared pretty well in contrast with retail REITs.
Although the long term outlook of office segment remains lacklustre due to an unabated glut, HLIB Research said this segment did relatively well in 2020 versis the weakness in the retail and hotel segment.
“Occupancy rate for office segment in our universe were also quite stable with more than 90 per cent occupied,” it said in its sector review.
“While we understand that work from home practices have been a concerning matter for office segment during the pandemic, we gathered that most REIT managers have not seen their tenants downsizing their space.
“Besides, some REIT managers observed that some of their tenants were undergoing renovation in view of physical distancing practices, to prepare their
employees when they come back to office.”
For 2021, HLIB Research believe employees will start returning to office gradually, hence ensuring a resilient demand for office space.
“Furthermore, as economy recovers, we believe small and medium enterprises ( SMEs_
will also start growing, therefore requiring the need of office space for their business,” it continued.
“However, we noted that SMEs usually only required smaller space as compared to big corporation and multinational corporation ( MNCs).
“That said, companies like MQREIT, KLCC Stapled Group and Sunway REIT – where they have niche assets and long term tenancy with big corporations and MNCs – will have a resilient office segment across its portfolio.”
Meanwhile, it also saw that industrial REITs has been resilient and remained upbeat on its long- term growth prospect. Industrial REITs has been steady all along despite the uncertainties and economic challenges from the pandemic.
“Moving forward, we reckon that this segment will continue to do well, supported by the growth in industrial activity,” it said. “We see demand in industrial properties driven by the surge in e- commerce activity, which has prompted more establishment of distribution centre by retailers and e- commerce players and enhancement of infrastructure development.
“We believe there is strong growth potential for Axis REIT as a leading player in industrial segment with its strategy of pursuing quality acquisitions with focus on Grade A logistics and manufacturing facilities.”