South-east Asian and Australian REIT issuers’ performance should remain resilient despite global trade uncertainties, underpinned by their asset quality and contractual revenue, says Fitch Ratings. Most rated issuers benefit from long weighted-average lease expiry profiles, well-spread lease expiration schedules, and tenant leases with operational cost pass-through provisions, annual rental escalations or inflation indexation, supporting cash flow visibility.
Structural demand tailwinds from rising e-commerce penetration and advanced manufacturing continue to support occupancy and positive rent reversions for quality logistics and high-specification industrial assets, even as reversion rates moderate from the elevated double-digit levels of previous years. Suburban offices and business parks, in contrast, will remain under pressure amid high vacancies in most markets as economic uncertainties mount. Rated issuers have sold most or part of their business parks, reducing the drag from these underperforming assets.
Fitch expects rated issuers’ portfolio rejuvenation efforts to continue, led by REITs with sponsors that have regional asset investment and management platforms. Trusts are actively transitioning away from older, non-core properties towards assets with stronger green credentials, while undertaking asset-enhancement initiatives to unlock portfolio value and improve rental yields. As a result, we do not expect significant deleveraging in the near term across rated issuers.
