The Smart Investor
    Facebook Instagram
    Saturday, June 10
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»REITs»3 Types of REITs to Survive a Recession
    REITs

    3 Types of REITs to Survive a Recession

    If you’re looking for resilience in the REIT sector, look no further than these three REIT categories.
    Royston YangBy Royston YangJanuary 27, 20234 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Word Fear with Red Cross
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    The REIT sector had to trudge on a rough road last year.

    The combination of high inflation and surging interest rates dampened sentiment for the asset class and caused valuations to tumble.

    Investors are also justifiably worried about a possible recession that may hit Singapore’s shores this year.

    A recession will reduce consumer spending and cause businesses to hunker down to save costs.

    These actions will hurt REITs as their real estate portfolios thrive on robust business activity.

    The good news is that not all REITs are affected to the same extent.

    Some REITs are better equipped to handle an economic slowdown as they have characteristics that make them resilient.

    Here are three types of REITs that can coast safely through a recession.

    Suburban retail REITs

    Suburban retail REITs have a distinct advantage when a downturn hits.

    Being located close to heartland areas, these malls should continue to enjoy healthy footfall and tenant sales even if there is an economic slowdown.

    A good example is Frasers Centrepoint Trust (SGX: J69U), or FCT.

    The REIT owns a portfolio of nine suburban malls that include Waterway Point, Tiong Bahru Plaza, and Hougang Mall.

    The retail REIT saw its distribution per unit (DPU) continue to head up even through the Great Financial Crisis (GFC) of 2008-2009.

    DPU went from S$0.0729 in FY2008 to S$0.0751 in FY2009.

    Only the movement restrictions from the pandemic could make FCT’s DPU decline sharply in FY2020, but it has since bounced back and in FY2022 has even exceeded the high recorded in FY2019 (pre-pandemic).

    Another REIT that owns suburban malls is CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT.

    Some of the malls in its portfolio include Bedok Mall, Junction 8, and Bukit Panjang Plaza.

    These REITs should maintain resilience in their portfolio as their suburban malls continue to be frequented even during a recession.

    Industrial REITs

    Industrial REITs fared well as a whole during the pandemic and their resilience can be attributed to the quality of their tenants.

    A slowdown may temporarily impact some of the industrial tenants but it is unlikely that they will reduce their space or storage requirements as demand will always return once the economic storm has passed.

    When selecting strong industrial REITs, you should look for the sub-sector their properties are in and also check out the diversity of their tenant base.

    Take Mapletree Logistics Trust (SGX: M44U), or MLT, for instance.

    The logistics REIT has a diversified tenant base of 882 tenants as of 31 December 2022.

    Its top 10 tenants take up around 23.2% of gross rental income (GRI), and its top three tenants are CWT, a logistics services provider, Equinix (NASDAQ: EQIX), a data centre owner and operator, and Coles Group (ASX: COL), a large Australian supermarket chain.

    Frasers Logistics & Commercial Trust (SGX: BUOU), or FLCT, also boasts a strong logistics and industrial (L&I) portfolio with full occupancy as of 30 September 2022.

    Its top 10 L&I tenants include reputable names such as Hermes (EPS: RMS), Techtronic Industries (HKSE: 0669), and BMW (ETR: BMW).

    Data centre REIT Keppel DC REIT (SGX: AJBU) is also in a good position to withstand a downturn.

    It has a diversified portfolio of 23 data centres spread across nine countries and with data needs set to grow exponentially in the coming years, Keppel DC REIT’s portfolio should see steady leasing demand.

    Healthcare REITs

    The third category of REITs that should stand firm during an economic downturn is healthcare REITs.

    With healthcare being an essential service, it’s unlikely that people will stop spending on it even if a recession comes along.

    Parkway Life REIT (SGX: C2PU) should see steady demand for its three Singapore hospitals and 57 Japanese nursing homes.

    The healthcare REIT has posted impressive core DPU growth over the years with 13 years of consecutive increases.

    Its DPU even jumped from S$0.0683 in 2008 to S$0.0774 in 2009 during the depths of the GFC.

    Parkway Life REIT has also collaborated with its sponsor IHH Healthcare (SGX: Q0F) to carry out refurbishment work on Mount Elizabeth Hospital to improve its equipment, technology, and infrastructure.

    Another healthcare REIT is First REIT (SGX: AW9U) with a portfolio of hospitals and nursing homes in Singapore, Indonesia and Japan.

    These two healthcare REITs may just be the shelter you need in your REIT portfolio if the storm hits.

    Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.

    Follow us on Facebook and Telegram for the latest investing news and analyses!

    Disclaimer: Royston Yang owns shares of Frasers Logistics & Commercial Trust and Keppel DC REIT.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Sack of Money with Hour Glass

    Want to Be a Better Investor? Here Are 4 Things You Should Learn

    June 9, 2023
    Cybersecurity Pic 2

    5 US Growth Stocks That Could Deliver Explosive Returns to Your Portfolio

    June 9, 2023
    Solar Panels and Wind Farm

    4 Singapore Blue-Chip Stocks Offering a Great Mix of Growth and Dividends

    June 8, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.