Earlier this year, I shared some salient points in a research by DTZ.
Update (23 November 2011):
DTZ said demand for office space has declined, and the sector is now considered "cold".
It defines "cold" as property that is more than 5 per cent overpriced, with potential yield below expectations.
"Singapore has traditionally been a volatile market, and our rental outlook has been impacted by the global slowdown, resulting in lower expected returns over the next five years," DTZ said in a statement.
It also lowered its forecast for rental growth in industrial property to 3.1 per cent over the next five years.
Read article here.
I have shared in various blog posts why I am heavily invested in industrial property S-REITs compared to office property S-REITs, believing that prospects for the former are relatively better in the next few years.
At current prices, distribution yields for AIMS AMP Capital Industrial REIT (94c) and Sabana REIT (87c) are in excess of 10%. Income distributions are sustainable given the long leases. The REITs also have many months of rental deposits collected as safeguards against tenants defaulting. Balance sheets are relatively strong with gearing levels at 30+%.
It is hard to say if unit prices of industrial property S-REITs would or would not weaken over the next few months. However, it is safe to assume that they are relatively good investments for income.
Added on 16 Dec 2011:
Rents for Grade A office space to fall by 15 per cent in 2012: Savills
Layoffs in several banks have hurt the office market as firms also turn conservative and hold off expansion to save costs.
Related posts:
1. Industrial rents forecast strongest for Singapore.
2. Office S-REITs VS. Industrial S-REITs (2).