RHB keeps Overweight rating on Singapore REITs

RHB expects modest cap-rate compression.

RHB has maintained its Overweight call on Singapore real estate investment trusts (REITs), covering 15 names with 12 Buys and three Neutrals, saying the asset class has “turned the corner” heading into 2026.

The brokerage cited four drivers for the constructive stance: falling domestic rates, with its economists forecasting SORA 3M at 0.85% in 2025 and 0.68% in 2026 and resilient income growth.

It also noted a firm Singapore dollar amid risk-off flows; and policy support, including EQDP funds being eligible to invest in S-REITs ,and the launch of the iEdge Singapore Next 50 indices, which added 15 S-REITs.

Valuations have tightened alongside a roughly 9% year-to-date rise in the sector index, compressing forward dividend yields to about 5.5%—a spread of roughly 370 basis points over the Singapore 10-year at around 1.83% as of Sept 26, RHB said.

On book values, the sector trades near 0.98x P/BV versus a long-term mean of 1.03x.

With rates easing, RHB expects modest cap-rate compression—5–30 bps in Europe and 5–15 bps in the US, UK, China and Australia—supporting a slight NAV uplift by end-2025.

Operationally, about 90% of S-REITs reported flat-to-lower interest costs into the first half as SORA 3M fell about 94 bps to 2.05% by end-June, with a further ~60 bps decline since; the benefit should show more clearly in 2026. Average sector gearing stands near 39%, with core NPI trending higher.

Capital-market activity has firmed. RHB tallied SGD4.6 billion of acquisitions year to date and expects $6b to $7b in 2025, led by industrial—including data centres—at 45% of deal value, followed by retail at 26% and office at 23%.

Notable transactions include CICT’s additional stake in CapitaSpring and Keppel DC REIT’s purchase of a Japan hyperscale data centre.

Listings have resumed with NTT DC REIT and Centurion Accommodation REIT debuting in the third quarter, whilst three to four more IPOs are in the pipeline. Two de-listings—Paragon REIT and Frasers Hospitality Trust—were also announced this year.

Divestments reached a record 29 transactions totalling $2.7b year to date, generally at slight premiums to book, with US office assets an exception.

RHB’s sector pecking order is Industrial ahead of Office, Retail, Overseas and Hospitality, with a suggested mix of roughly 70% Singapore-centric large caps and 30% alpha small/mid caps.

Key risks include recession, tariff-policy changes, resurgent inflation, and adverse foreign-exchange moves. Top picks are CapitaLand Ascendas REIT (target price $3.20), CapitaLand Integrated Commercial Trust ($2.44), Frasers Centrepoint Trust ($2.50), Suntec REIT ($1.48), and AIMS APAC REIT ($1.52).