S-REITs maintain strength with UOB 'Overweight' call

The FTSE ST REIT Index climbed 4.2% in June, significantly outperforming the Straits Times Index.

Singapore’s REITs remain a top stock pick, as the country remains a "haven" due to its fiscal discipline and a lower reciprocal tariff of 10%.

In a report, UOB Kay Hian named suburban retail REITs such as CICT, FCT, and LREIT, and data centre REITs such as DCREIT and KDCREIT as "buys."

The brokerage cited Singapore’s macroeconomic stability, disciplined fiscal policy, and strong yield spreads as key reasons for continued investor confidence.

Singapore’s position as a safe haven was underscored by a low 10-year government bond yield of 2.2% and a three-month compounded SORA of 2.1%. These conditions have helped REITs offer attractive risk-adjusted returns. “Singapore is a haven due to its fiscal discipline and having the lowest reciprocal tariff of 10%,” UOB Kay Hian noted in its June sector update.

The FTSE ST REIT Index (FSTREI) climbed 4.2% in June, significantly outperforming the Straits Times Index, which rose 1.8%. UOB’s top REIT picks include suburban retail plays such as CapitaLand Integrated Commercial Trust (CICT), Frasers Centrepoint Trust (FCT), and Lendlease REIT (LREIT), as well as data centre-focused names like Keppel DC REIT (KDCREIT) and Digital Core REIT (DCREIT).

Industrial giant CapitaLand Ascendas REIT (CLAR) was also highlighted for its resilience and growth potential.

Data centre REITs gained momentum in June, boosted by optimism surrounding AI demand following Nvidia’s strong first-quarter results. Keppel DC REIT and Digital Core REIT were among the top monthly gainers, up 6.4% and 6.0% respectively.

Logistics REITs such as Frasers Logistics & Commercial Trust (FLT) and Mapletree Logistics Trust (MLT) also posted solid gains, helped by easing trade tensions.

On the corporate front, CapitaLand China Trust (CLCT) announced plans to divest a mature mall in Changsha and reinvest part of the proceeds into a 5% stake in a new C-REIT (CapitaLand Commercial REIT) in Shanghai.

The strategic move is projected to deliver 0.4% accretion to its distribution per unit and reduce aggregate leverage from 42.6% to 41.4%.

Other notable activity included PGIM Real Estate’s sale of three strata floors at 108 Robinson Road for $55.8m to Kwan Im Thong Hood Cho Temple, with per-square-foot prices reaching as high as $3,950. Centurion Corporation also submitted a REIT listing application for a portfolio of worker and student accommodation assets.

KDCREIT’s inclusion in the benchmark Straits Times Index as of 23 June further cemented investor confidence in data centre REITs as a long-term structural play.

Despite mixed performances across individual counters, the broader S-REIT sector continues to benefit from declining bond yields and a defensive investor rotation into stable, income-generating assets.

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