While the effects of the Covid-19 pandemic have brought about challenges for the real estate sector, certain opportunities have emerged and provided tailwinds for others, says the OCBC Investment Research (OIR) team in a June 15 sector update.
For instance, the accelerated digitalisation processes and e-commerce penetration rates have upped demand for data centres and modern logistics properties.
This, the team believes, bodes well for Keppel DC REIT and Ascendas REIT (A-REIT) to a smaller extent.
For Keppel DC REIT, this is attributable to the fact that 68% of its portfolio assets under management (AUM) is located in Asia-Pacific, with the remainder being in Europe including the UK.
A-REIT currently has around 10% of its AUM contributed by data centres. Though not a significant proportion, the team believes that this is an asset class which management will focus on moving forward.
In the logistics sector, the team at OCBC prefers Frasers Logistics & Commercial Trust (FLCT) and Mapletree Logistics Trust (MLT) for its logistics properties in Australia, Germany and the Netherlands for the latter, and for its pure-play logistics REIT portfolio in countries including Singapore, China and Australia for the latter.
OCBC has rated all four REITs at ‘buy’ with target prices of $3.32 (Keppel DC REIT), $3.84 (A-REIT), $1.62 (FLCT) and $2.10 (MLT).
As the office sector faces disruption from the ongoing work-from-home (WFH) trends, the team says they are more positive on real estate players who’re able to offer flexible workspace solutions and speed to market in their offerings, like CapitaLand.
The property group has responded to the changing needs in current times by offering tenants a “core-flex” solution, which allows tenants to mix and match traditional office space with flexible spaces into a lease, notes the team.
For retail REITs, an omnichannel strategy, like the ones CapitaLand, CapitaLand Integrated Commercial Trust (CICT), Frasers Centrepoint Trust (FCT) and Simon Property Group in the US, have adopted.
FCT, for instance, has introduced several key digital platforms with Frasers Property Retail. These are the Frasers e-store and the enhanced Makan Master, a food and beverage (F&B) concierge app that allows consumers to combine their orders from up to three F&B outlets within the same mall in one receipt.
CapitaLand has, too, launched an e-commerce platform, eCapitaMall and an online food ordering platform named Capita3Eats since 2020.
The team has rated all but Simon Property Group at “buy”, with the latter at “hold”.
They have given target price estimates of $4.03 (CapitaLand), $2.51 (CICT), $2.78 (FCT) and US$149 (Simon Property Group).
Shares in Keppel DC REIT and A-REIT closed $2.53 and $2.97, while FLCT and MLT closed $1.40 and $2.05 respectively. Shares in CapitaLand, CICT and FCT closed $3.74, $2.11 and $2.42 on June 23.
As at 10.24am (New York time), shares in Simon Property Group are trading at US$132.16.
Photo: Unsplash
