Numerous Singapore real estate investment trusts (S-Reits) have pursued greenfield developments this year, with Aims AMP Capital Industrial Reit, CapitaMall Trust, CapitaCommercial Trust, Ascendas Reit and K-Reit Asia all announcing their new developments, according to a report by Moody’s.
It said that high valuations fuelled by increased competition for properties have created challenges for S-Reits trying to purchase yield-accretive assets in Singapore.
Moody’s Investors Service Analyst Alvin Tan said, “Low interest rates and more buyers competing for the same buildings have raised prices for already-developed properties, thus making development projects increasingly attractive for S-Reits.”
But such projects raise risks in property development and put pressure on key credit metrics during their construction, as S-Reits take on additional debt before the properties can generate income from tenants.
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