Credit ratings agency Moody’s has revised its outlook for Singapore’s real estate investment trusts (S-REITs) from negative to stable.
It reflects its view that the sector’s fundamental credit conditions will remain stable over the next 12-18 months.
According to Moody’s, the outlook was supported by three factors which includes the stabilization of rents across the various properties and the strong rebound of the Singapore economy.
During Q1 of 2010, the country registered an increase of 13 percent on-year.
Moody’s added that most S-REITs experienced some improvement in their Q1 revenue on-year.
They have taken action to improve their capital structure since the H2 of 2010.
The need for short-term bridge loans has lessened due to the decline in acquisitions.
On the retail sector, Moody’s expects slower rent declines for office and industrial properties.
This comes as tourist arrivals to the country increase, spurring the demand for retail space.
According to Peter Choy, senior credit officer and vice president of Moody’s, "Although developers are launching a strong supply of office, retail, and industrial properties in Singapore during the rest of 2010 and into 2011, the downward adjustment in rents of the last 12 months has already – and substantially – reflected the coming increase in inventory."
At the end of Q1, prime office rents decreased to 0.7 percent from the previous quarter.
During the same period, a slight increase of 1.25 percent from Grade A office space was registered.
From the Q4 of 2008 through 2009, the industrial REITs proved rather flexible throughout the global financial crisis.
Moody’s believes the recovery in Singapore’s manufacturing sector will further strengthen the stability of industrial properties.