Malaysian real estate investment trusts (M-REITs) are still expected to offer stable returns and capital growth despite experiencing a bout of dividend yield compression, said Malaysian REIT Managers Association (MRMA) chairman Datuk Stewart Labrooy.
“REITs have had an extremely good run, witnessing a compression in yields never seen before in the M-REIT market. I believe yields have compressed as far as they can go,” he said.
He noted that certain REITs are expected to continue performing, provided the funds continue to build up their portfolios and have demonstrable organic growth.
“My suggestion is for investors to examine these REITs because acquisitions tend to be yield accretive and higher income translates into better yields and a better share price. They are still a popular long-term investment at whatever price point you invest in,” Labrooy said.
The outlook for the real estate market, especially commercial and industrial properties that typically make up REIT portfolios, is mixed.
“The office glut will continue unabated in Kuala Lumpur and coupled with a shift outside of Kuala Lumpur for office destinations, this will depress rents for some time to come. Only those office locations with good public transport connectivity will enjoy strong occupancy levels,” he said.
Malls continue to be sought-after properties, but Labrooy is quick to draw a distinction between the vibrant, bustling malls and those that languish in inactivity, adding that management is key to the success of malls.
He also said the development of industrial assets will experience a boom in the coming years as Iskandar Malaysia in Johor and Penang’s Batu Kawan industrial estates release prime sites for the establishment of new industries.
Labrooy, who is also vice-president of the Asian Public Real Estate Association (Aprea) and CEO and executive director of Axis Real Estate Investment Trust, will be speaking at The Edge Investment Forum on Real Estate 2013 on May 11 at The Royale Bintang Damansara in Mutiara Damansara.
In his presentation, titled Is this the REIT time?, he will discuss the potential of REITs, the pros and cons of the instrument, performance of the commercial property market and how it will affect REITs.
The forum is sponsored by Malaysia Building Society Bhd and Sunway Bhd.
The annual forum is organised by The Edge and participation is free for readers of The Edge, with seats available on a first-come first-served basis. Online registration opens on April 22, 9am via www.event.theedgemalaysia.com.
This article first appeared in The Edge Financial Daily, on April 19, 2013.