Here’s why one facility is poised to rock Singapore’s industrial property market

Mapletree Industrial Trust hit the jackpot.

Singapore’s industrial property market is poised to see a major disruption in the form of Hewlett Packard’s (HP) latest built-to-suit (BTS) property once it is completed by end-2016/1H17. To date, HP occupies roughly 2.3m sqft of space across three main locations in Singapore—Alexandra Technopark, Tuas, and Depot Road.

According to a report by DBS, as HP has committed close to 20 years for the building, HP will likely consolidate part of its Singapore operations to the new property in order to boost operational efficiency and optimise its real estate footprint in Singapore.

DBS reports that Mapletree Industrial Trust (MINT) will come out as the prime beneficiary post-consolidation. The HP facility’s contribution will arrive at an ideal time for MINT, coming in just when the REIT is anticipated to face downside pressures to income given the flagging outlook for industrial property.

MINT is looking at a DPU jump of as much as 7% by end-FY19 once HP’s contribution kicks in, with the initial contribution starting around the first quarter of FY18. DBS cautions investors to re-enter on a pull back, stating that the HP boost is largely priced in.

Meanwhile, DBS argues that the impact on Frasers Commercial Trust (FCOT) from losing HP as tenant is overblown, even as HP forms roughly 17% of FCOT’s gross rental income. Further, FCOT could still keep a stable DPU profile while offering a fairly good yield.

“Assuming an AEI, our base case of HP partially moving out of ATP and a tweak in the proportion of management fee units, FCOT should be able to maintain a flattish DPU profile but still offer an attractive forward yield of 7.5% which is above its mean yield of 7%,” posits DBS.

For Ascendas REIT, the perks from HP building is considerably smaller. DBS believes that the lease is likely to see a renewal given its location within within the new Depot Road cluster.