MALAYSIAN real estate investment trusts (M-REITs) are expected to continue to offer stable returns and capital growth despite experiencing dividend yield compression recently, says Datuk Stewart Labrooy, chairman of the Malaysian REIT Managers Association.
"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 tells City & Country.
Certain REITs will continue to perform well, provided the funds keep building their portfolios and post demonstrable organic growth, he adds.
"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 says.
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. Coupled with office destinations shifting outside the city centre, this will depress rents for some time to come. Only those office locations with good public transport connectivity will enjoy strong occupancy levels," remarks Labrooy.
He says malls continue to be much sought-after properties, although he is quick to draw a distinction between the ones that are vibrant and bustling and those that are languishing. Management is key to the success of malls, Labrooy adds.
"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 is also vice-president of the Asian Public Real Estate Association and is CEO and executive director of Axis Real Estate Investment Trust (Axis-REIT).
Axis-REIT comprises offices, factories, warehouses and other industrial properties.
Labrooy will be speaking at The Edge Investment Forum on Real Estate 2013 to be held on May 11 at The Royale Bintang Damansara in Mutiara Damansara.
His presentation, entitled Is this the "REIT" time?, will discuss the potential of REITs, pros and cons of the instrument, performance of the commercial property market and how it will affect REITs.
Sponsors of the forum are Malaysia Building Society Bhd and Sunway Bhd.
The forum is an annual affair organised by The Edge. Participation is free for its readers with seats available on a first-come first-served basis. Registration opens on April 22, 9am via www.event.theedgemalaysia.com.
This story first appeared in The Edge weekly edition of Apr 22 - 28, 2013.