KUALA LUMPUR: Malaysia's real estate investment trusts (REITs) outlook remains positive with industrial exposure due to strong demand for data centers and high-tech warehouses, according to CIMB Securities.
Looking ahead of 2025, the firm said industry experts at a recent Malaysian Real Estate Investment Trust (M-Reit) Forum had expressed optimism about the industrial sector.
They, however, identified some challenges within the office sector.
The experts were cautiously optimistic about the office sector as employees return to office environments, expecting higher rental rates for prime office spaces.
"However, they projected poor occupancy rates for Grade C office buildings (or older properties with limited amenities and rather basic infrastructure) with the opening of TRX and Merdeka 118 office buildings," it said in a note.
Regarding investments in Malaysia Reits, CIMB Securities said investors typically seek stable and sustainable growth, high yields exceeding those of Malaysian Government Securities, a certain market cap size that offers shares liquidity and long-term growth prospects and ESG initiatives.
Experts indicated that the general expectation for REIT total returns is approximately 10 per cent per annum, and investors typically prefer Reits to focus on local assets and pay regular dividends.
Additionally, CIMB Securities noted that the average FTSE environment, social and governance (ESG) score for the Reit sector was 2.7, which is below the benchmark inclusion score of 2.9 for the FTSE4Good Index.
"This indicates that there is room for Reit players to enhance their ESG practices."
The firm maintained its "Neutral" rating for the sector, with the key picks being IGB Real Estate Investment Trust and Sunway Real Estate Investment Trust.