Retail REITs will continue to outperform office REITs, says HLIB Research

KUALA LUMPUR (Jan 23): Hong Leong IB Research has maintained its “Neutral” rating on the real estate investment trust (REIT) sector and said retail REITs will continue to outperform over office REITs given its pricing power and potentially higher rental income from positive rental revision.

In a note Friday, the research said while GST will be dampener for retail REITs, it sees no significant impact as the government has broadened the list of items in the zero rated and exempt supplies.

“Plus, REIT operators are able to pass any extra cost incurred back to tenants.

“We maintain neutral on the sector with Buy call for Quill Capita Trust (TP RM1.34), while for exposure in retail REIT in the longer term, we prefer Pavilion REIT (TP RM1.47) and IGB REIT (TP RM1.23),” it said.