Axis-REIT goes shopping

AT a time when businesses are cautious about putting more money into the market, Axis Real Estate Investment Trust (REIT) is doing the opposite.

The fifth largest REIT by market capitalisation wants to acquire more new properties, banking on the shift in global supply chains amid the tariff war.

Axis-REIT believes the supply chain shift will potentially attract more companies into Malaysia to diversify their manufacturing and distribution bases.

Will this strategy work? Will Axis-REIT, which enjoys an average occupancy rate of 97%, be able to fill these new assets with quality tenants?

While it remains to be seen, Axis-REIT’s current portfolio of assets is already predominantly logistics warehouses and manufacturing facilities.

This is set to grow as the REIT goes on a shopping spree. By 2030, Axis-REIT wants to double its total assets under management to RM10bil from RM5.2bil now.

This means its asset value needs to grow by nearly RM5bil in just five years or so.

Less than three weeks ago, Axis-REIT announced a new acquisition value target of RM430mil, which is a sharp increase from the RM300mil target mentioned in January.

In an interview with StarBiz 7, Axist-REIT acknowledges the concerns over a slowing domestic economy, yet it believes that the timing is “opportune” to scale up its acquisitions.

Leong Kit May, Axis-REIT Managers Bhd chief executive officer-cum-executive director, says Malaysia continues to attract foreign investors due to the matured infrastructure and ecosystem in place for the industrial segment.

The country also offers stability to investors, both economically and politically.

“Malaysia’s manufacturing, logistics and technology sectors also continue to expand, fuelling demand for high-quality industrial assets and also for some of the vendors to go asset light to redeploy their capital.

“This will translate into increasing demand for industrial and logistics properties, segments in which Axis-REIT has a strong and growing presence.”

Leong points out that the REIT is “selectively targeting” Grade A logistics and manufacturing facilities with long leases and strong tenant covenants in prime last-mile distribution locations.

“This strategy is not only yield-accretive but also enhances portfolio durability in the face of macroeconomic shifts.”

Axis-REIT’s portfolio comprises 68 properties currently, after the disposal of The Annex – a single-storey warehouse with a double-storey office – was completed on April 30.

The Annex was sold for a total cash consideration of RM24.2mil, with a net gain on disposal of RM9mil.

Without the Annex, logistics warehouses and manufacturing facilities make up approximately 69% of Axis-REIT’s asset portfolio.

Interestingly, all 68 assets of Axis-REIT are located in Peninsular Malaysia.

This may change moving forward as Leong says the REIT is actively exploring potential investments in Sabah and Sarawak. Leong declined to provide more details about the identified assets for acquisition, adding that discussions are still ongoing.

The strategy to expand in the industrial sector, along with sustained demand in logistics and manufacturing, will be key catalysts for Axis-REIT’s earnings growth this year, says Leong.

She also adds that Axis-REIT’s continuous improvement in tenant mix and occupancy will help lift earnings.

Axis-REIT started its financial year 2025 (FY25) on a strong footing, having delivered a 19% year-on-year increase in total trust income and a 16% rise in net trust income in the first quarter.

A distribution of 2.5 sen per unit was declared for the quarter.

Leong believes the REIT is well-positioned for a “stable and long-term” income growth in 2025, given its strong portfolio occupancy rate and a weighted average lease expiry of 4.8 years.

“As at March 31, we have grown our tenant base from 177 to 182 and increased the number of fully occupied properties from 56 to 58.”

To maintain tenant satisfaction levels and sustain a high property portfolio occupancy rate, Axis-REIT says it will continue to invest in strategic asset enhancement initiatives (AEI) this year.

Leong did not mention the estimated expenditure for AEIs in 2025 but for the first quarter of FY25, it spent about RM4.51mil on the enhancement of its properties, including maintenance.

In the previous full-year FY24, the REIT spent RM18.3mil for AEIs with a focus on industrial assets.

“We proactively carry out AEIs to refurbish, upgrade and modernise selected properties to ensure they remain attractive and relevant in today’s market.

“These enhancements not only improve property appeal and functionality, but also align with our environmental policy by incorporating green and sustainable features wherever possible,” she says.

Asked about Axis-REIT’s expected rental reversions for FY25, Leong says the overall outlook remains favourable.

However, she cautions that reversion levels may vary depending on lease terms and market sentiments.

“Axis-REIT has consistently demonstrated strong rental reversion performance, achieving a 5.3% increase in FY24, following the 5.8% in FY23.

“This reflects the underlying strength of our asset quality and leasing strategy.

“In FY25, we anticipate rental reversion to remain positive, driven by commendable tenant retention, and continued interest in strategic industrial zones,” says Leong.