Key Takeaways:
Morgan Stanley forecasts Link REIT’s (00823.HK) key profitability metrics will weaken, with its Distribution Per Unit (DPU) potentially falling 8 percent in fiscal 2026 as the growth of e-commerce pressures its retail property portfolio.
"Despite improved tenant sales, the broker still expected the negative rental reversion to widen," Morgan Stanley said in a research report. The bank cited the acceleration of online shopping and further penetration of e-commerce from mainland China as primary headwinds.
The analysis projects Link REIT’s negative rental reversion will increase from 7.5 percent in the first nine months of fiscal 2026 to 8.5 percent for the full year. This pressure on rental income is expected to cause the DPU to fall to $2.52. The bank maintained its "Equalweight" rating on the trust, setting a price target of $37. The forecast comes after Link REIT announced the disposal of its stake in Swing By @ Thomson Plaza, a retail property in Singapore, for SGD250 million.
The bearish outlook from a major investment bank highlights the structural challenges facing Hong Kong's retail landlords. As consumer behavior increasingly shifts online, the ability of REITs to maintain rental growth and distributions may come under sustained pressure, potentially affecting broader investor sentiment in the real estate sector.
This article is for informational purposes only and does not constitute investment advice.
