S-REITs accelerate asset recycling amidst yield pressure

REIT index rises 0.4% whilst retail names lead sector gains.

Singapore-listed real estate investment trusts (S-REITs) stepped up asset recycling as lower domestic interest rates supported acquisitions and divestments, according to a monthly sector update.

A UOB Kay Hian report published on 1 July said the FTSE ST REIT Index rose 0.4% in June, underperforming the Straits Times Index, which gained 2.6%.

The 10-year Singapore Government bond yield was stable at 2.04%, whilst US core personal consumption expenditures inflation rose 0.1 percentage point month on month to 3.4% year on year in May.

CapitaLand Ascendas REIT agreed to acquire 5 Tuas Avenue 5, a seven-storey logistics property with a gross floor area of 540,000 square feet, for $133.9m.

The asset, completed in 2021, is fully occupied, has a weighted average lease expiry of five years, and fixed annual rental escalations of 2%.

The acquisition is expected to complete in the second half of 2026 and deliver a first-year net property income yield of 6.5% after transaction costs, with 0.2% distribution per unit accretion.

CapitaLand Ascott Trust agreed to divest The Robertson House by The Crest Collection in Singapore for $360m, which is expected to generate net proceeds of $342m and a net gain of $38m, with completion targeted for the third quarter of 2026.

Mapletree Industrial Trust completed the divestment of its Philadelphia data centre at 2000 Kubach Road on 23 June 2026 for about $18.7m (US$14.5m), at a 4.3% premium to independent valuation after weak post-lease demand.

OUE REIT proposed the divestment of Crowne Plaza Changi Airport for $500m, at a 1.3% premium to two independent valuations. The deal is expected to reduce aggregate leverage to 36.6% from 41.5%.

Retail REITs, including CapitaLand Integrated Commercial Trust, Lendlease Global Commercial REIT, Suntec REIT, and Mapletree Pan Asia Commercial Trust, led gains in June.

Industrial and logistics names Mapletree Logistics Trust and AIMS APAC REIT also advanced.

REITs with European exposure were the weakest performers, whilst US office REITs also declined.

The report maintained an “overweight” view on S-REITs, citing a 3.8% yield spread, 0.9 standard deviations above the long-term mean.

It recommended selective buy positions in CapitaLand Integrated Commercial Trust, Frasers Logistics & Commercial Trust, NTT DC REIT, and United Industrial REIT.

(US$1 = SG$1.29)

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