S-REITs diverge as rental reversion offsets occupancy softness

Stronger leasing spreads mask soft occupancy and rising cost pressures across S-REITs.

Singapore real estate investment trusts (S-REITs) are showing a widening divergence in leasing fundamentals, with strong rental reversions cushioning softer occupancy trends and rising cost pressures across industrial, office and logistics portfolios, according to recent updates from analysts reports.

Rental reversion trends remained positive but varied by portfolio and asset class.

CapitaLand Ascendas REIT recorded a portfolio-wide rental reversion of 10.6% in its Q1 2026 update, supported by strength across its industrial and business park assets.

Suntec REIT reported 9.5% rental reversion in its Singapore office portfolio, with a higher uplift of 13.2% at Marina Bay Financial Centre Towers 1 & 2 and One Raffles Quay.

ESR REIT posted 9.2% rental reversion, driven by logistics at 13.2%, alongside contributions from high-spec industrial (6%) and general industrial (5.8%) segments.

Meanwhile, Elite UK REIT reported no headline rental reversion figure, but saw valuation uplift driven by lease re-gearing activity, with 64% of leases by income due in 2028 extended by seven to 10 years.

At the same time, operators highlighted a more cautious leasing environment, with Morningstar noting that leasing conditions for Singapore business parks remain competitive, alongside tenant cost sensitivity, longer lease negotiations and geopolitical uncertainty.

ESR REIT management also guided that rental reversion is expected to moderate to single-digit levels in FY2026 to 2027 amidst rising supply, cost pressures and macro uncertainty.

Cost dynamics remain a key pressure point across portfolios, although impact is largely contained through hedging, pass-through mechanisms and fixed-rate structures.

Elite UK REIT reported full insulation from rising utility costs due to triple-net leases, whilst Suntec REIT benefits from a reduction in Australia withholding tax provisions and lower financing costs.

ESR REIT, however, noted that higher utilities and property tax weighed on NPI margins, with electricity accounting for 28% of operating expenses.

Despite these pressures, balance sheet positioning remains broadly stable across the sector, with gearing levels ranging from 37.4% at Elite UK REIT to 44.3% at ESR REIT.

Funding costs also showed early signs of stabilisation, with Suntec REIT’s cost of debt at 3.56%, ESR REIT at 3.34%, and Elite UK REIT reporting 4.7% interest costs that were flat quarter-on-quarter.