Analysts stay positive on S-REITs despite rate pressure

UOB Kay Hian and DBS said resilient yields, lower funding costs, and stronger assets could support recovery.

Analysts remained constructive on Singapore REITs as the sector showed resilience despite macro uncertainty and pressure from higher long-end bond yields.

UOB Kay Hian maintained its overweight call on S-REITs, citing stable cash flows, attractive yields, and positive catalysts from low domestic interest rates and limited new supply in the retail, office, and data centre segments.

In its 1Q26 round-up, UOB said Frasers Centrepoint Trust, Frasers Logistics & Commercial Trust, Keppel DC REIT, and Suntec REIT exceeded expectations, whilst Keppel REIT and Mapletree Pan Asia Commercial Trust missed expectations.

Results from 11 of the 17 large-cap S-REITs under UOB’s coverage met expectations.

UOB said retail REITs showed stronger tenant sales and positive rental reversions. Frasers Centrepoint Trust recorded a 6.5% rental reversion, whilst Lendlease REIT’s retail rental reversion rose to 12.2%.

Office REITs also remained supported by a limited supply. Suntec REIT’s distribution per unit rose 23.9% year-on-year in 1Q26, driven by higher joint venture income from Marina Bay Financial Centre and One Raffles Quay.

In logistics, UOB said Frasers Logistics & Commercial Trust’s assets in Australia, Europe, and the UK maintained full occupancy, whilst Mapletree Logistics Trust continued to face weaker conditions in China.

Data centre REITs also posted steady performance, with Keppel DC REIT reporting 19% net property income growth in 1Q26.

DBS said S-REIT valuations have largely priced in macro and interest rate risks. The sector is trading at an estimated FY26 yield of 6.2%, implying a spread of around 4.0% against the 10-year Singapore government bond.

DBS said close to 85% of S-REIT managers expect interest costs to remain stable or decline in 2026, which could support a recovery in distributable income.

It expects the sector to deliver around 3% distribution per unit compound annual growth rate over FY26 to FY27.

DBS said the sector is becoming a stock-picker’s market, with REITs backed by strong balance sheets, resilient occupancy, pricing power, and visible growth pipelines likely to outperform.

DBS prefers office, followed by industrial, retail, and hotels. Its preferred large-cap picks are CICT, CapitaLand Ascendas REIT, and Mapletree Logistics Trust, whilst its preferred mid-cap picks include Lendlease REIT, Parkway Life REIT, NTT DC REIT, and Centurion Accommodation REIT.

UOB’s top picks are CICT, Frasers Logistics & Commercial Trust, NTT DC REIT, and UIBREIT.