REIT Watch – S-REITs with China retail assets log mixed 2024 performance; may benefit from consumption push

S-REITs with retail assets in Greater China

Source: Bloomberg, SGX, Data as of March 28

Real estate investment trusts (S-REITs) with retail assets in China have posted a mixed performance in 2024 with stable occupancies, but negative rental reversions amid cautious consumer sentiment in the market. 

Even so, some positive trends have started to emerge, with the S-REITs reporting improvements in shopper traffic and tenant sales in their latest results. 

At the broader macro level, China consumption has also started 2025 strong, with retail sales rising 4 per cent year-on-year (y-o-y) in the January to February period, improving from 3.7 per cent growth in December 2024. Market expectations are for retail sales to continue the growth in 2025, amid stimulus from the central government. 

CBRE Research is projecting for China retail sales growth to reach 5 per cent in 2025, up from 3.5 per cent in 2024. It noted that several key retail categories have exhibited a strong recovery after the Chinese central and local governments stepped up consumption stimulus policies in the second half of 2024.

A continued improvement in consumption sentiment could be beneficial for S-REITs that hold retail assets in the Greater China region over the longer term, even as some near-term headwinds persist.

CapitaLand China Trust (CLCT) reported net property income (NPI) of RMB1.2 billion in FY2024, supported by stronger retail performance. However, lower contributions from its business parks and logistics parks, resulted in a 5.8 per cent y-o-y decline in NPI.

Retail assets constitute over 70 per cent of CLCT’s portfolio, while the remainder are from business parks and logistics parks.

CLCT’s manager said that on a like-for-like basis for CLCT’s nine retail assets, retail NPI increased 1.9 per cent y-o-y in FY 2024. The three malls that underwent asset enhancement initiatives (AEI) in 2023 demonstrated strong performance, achieving a 13.7 per cent y-o-y growth in NPI.

Portfolio retail occupancy rate was stable and high, at 98.2 per cent as at 31 Dec 2024. Rental reversion for FY2024, however, was negative 1.1 per cent, as the manager sought to attract and onboard new tenants. In FY2024, both shopper traffic and tenant sales improved compared to FY2023.

CLCT’s manager noted that its retail properties remain a key asset class positioned to benefit from government initiatives aimed at boosting domestic consumption, enhancing long-term retail demand.

Similarly, the manager of Sasseur REIT also noted that the Chinese government has identified boosting consumption as one of its priorities, and it expects new opportunities to emerge in creating innovative consumer experiences, strengthening supply chains, and unlocking untapped market potential.

Sasseur REIT – which owns four outlet malls in China – reported stable EMA (entrusted management agreement) rental income and distributable income in FY2024 amid lower finance cost and tax expenses despite reduced sales y-o-y.

Portfolio occupancy rose to 98.9 per cent as of 31 Dec 2024, an all-time high as the manager’s leasing strategies and efforts continued to drive high occupancy levels.

Sasseur REIT’s manager noted that preliminary sales data from this year’s Lunar New Year season indicate strong buying momentum, with a double-digit sales growth across the portfolio’s outlets in January 2025. 

“Given these positive indicators, we remain cautiously optimistic about the sales outlook for our portfolio’s outlets in 2025,” it said.

Elsewhere, Mapletree Pan Asia Commercial Trust (MPACT), which owns the Festival Walk retail mall in Hong Kong said in its 3Q FY25 results that the mall saw above-market improvement in shopper traffic and tenant sales, rising 15.6 per cent and 13.1 per cent quarter-on-quarter respectively. 

MPACT’s manager added that intensified marketing efforts countered market-wide impact of currency-driven outbound travel and cross-border consumption trend by Hong Kong residents.

Festival Walk’s committed occupancy improved to 97.1 per cent as of 31 Dec 2024, up from 96.4 per cent three months earlier. Rental reversions, however, were negative 7.2 per cent for the financial year-to-date, with the REIT also reporting negative rental reversions in its other China properties.

The manager noted that Greater China faces near-term headwinds, but it maintains its conviction in the market’s significant role in Asia’s long-term economic growth.

BHG Retail REIT reported a 16.3 per cent improvement in distributions per unit (DPU) for FY2024, driven by lower financing costs. Its portfolio maintained a healthy occupancy rate of 95.8 per cent as at end 2024, as its manager continued to be proactive in improving the quality of its tenancy mix.

The manager said it will remain focused on executing its current strategy of refreshing and optimising its malls’ tenant mix, remaining prudent in its capital management, and pursuing yield-accretive acquisition.”

CBRE Research said in its 2025 China Real Estate Market Outlook report that retail vacancy rates are expected to decline after supply peaks in 2025, and it expects landlords to mainly focus on improving operating performance by optimizing and upgrading tenant profiles in 2025.

However, it added that shopping centre rents are expected to decline in the short term before gradually stabilizing in the second half of 2025, as a further recovery in consumption will be needed to bring about a full rebound of consumer confidence and retailers’ rental budgets.

For more research and information on Singapore’s REIT sector, visit sgx.com/research-education/sectors for the SREITs & Property Trusts Chartbook.

REIT Watch is a regular column on The Business Times, read the original version.

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Originally Posted March 31, 2025 – REIT Watch – S-REITs with China retail assets log mixed 2024 performance; may benefit from consumption push