Positive outlook for REITs on strong consumer spending and tourism recovery

KUALA LUMPUR: Maybank Investment Bank Bhd maintains a positive outlook on the Malaysia real estate investment trust (M-REIT) sector as it is poised to see strong consumer spending, tourism recovery, and sustained demand for industrial property assets.

The firm projected the sector to record earnings growth of 9.6 per cent year-on-year (YoY) for 2025, driven by sustained occupancy levels and rental rates, alongside several new asset injections. 

"M-REITs with matured retail assets in prime locations remain attractive due to their ability to maintain high occupancy rates and achieve positive rental reversions. 

"Furthermore, hospitality assets are poised to benefit from the anticipated increase in inbound tourist arrivals. We continue to favour MREITs focused on the industrial segment for their resilient earnings, supported by long-term leases and robust rental reversion prospects," it said in a note. 

It also has a positive outlook on the retail and hospitality segments, which are expected to see improved occupancy and rental reversions at key shopping malls, especially IGB REIT, CapitaLand Malaysia Trust, and Sunway REIT.

Meanwhile, the expected return and improvement of tourism footfall would bode well for MREITs with hotel exposures, namely KLCC Property Holdings, Sunway REIT, and Pavilion REIT, while continued influx of tourism in Japan and Australia would be positive for YTL Hospitality REIT. 

"Meanwhile, we expect the office segment to remain stable. Industrial asset REITs remain in a sweet spot due to high demand for such assets but cap rates are expected to decline due to competition. AXIS REIT is back on its aggressive asset acquisition mode."

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