S-REITs steady in Q1 as rate cuts boost appeal

Two REITs exceeded expectations, whilst 12 met forecasts and seven came in below.

Singapore’s Real Estate Investment Trusts (S-REITs) are holding up well amid global economic uncertainty, with most reporting stable first-quarter results for 2025.

According to a sector update by UOB Kay Hian (UOBKH), two REITs—Digital Core REIT (DCREIT) and Frasers Centrepoint Trust (FCT)—exceeded expectations, whilst 12 met forecasts and seven came in below.

The brokerage maintains its OVERWEIGHT rating on the sector, citing Singapore’s fiscal discipline, attractive yields, and low market risk.

“Singapore is a safe haven due to fiscal discipline and its lowest reciprocal tariff of 10%,” analysts at UOBKH wrote. They noted that the supportive rate environment, with a 10-year government bond yield of 2.6% and a 3-month compounded SORA at 2.3%, has helped REITs remain attractive, especially as income-generating assets in a volatile world.

Retail REITs led performance. FCT posted a strong +9.0% rental reversion in 1HFY25, lifted by its key suburban malls: Causeway Point (+10.0%), Tampines 1 (+13.3%), and Century Square (+11.6%). CapitaLand Integrated Commercial Trust (CICT) also delivered solid results, registering a +10.4% rental reversion in retail and +5.4% in office for the first quarter.

Meanwhile, VivoCity, managed under Mapletree Pan Asia Commercial Trust (MPACT), reported a 16.8% rental reversion and a 6.5% increase in net property income despite enhancement works.

In the office segment, Keppel REIT (KREIT) recorded a 10.6% positive rental reversion. “It has already backfilled 70% of the space vacated by BNP Paribas at Ocean Financial Centre (OFC) with positive rental reversion at more than 30%,” the report noted.

Other commercial REITs, such as CICT, benefitted from ongoing asset enhancement initiatives and stable occupancy levels.

Data centre REITs were standout performers. Keppel DC REIT (KDCREIT) delivered 14.2% year-on-year growth in distribution per unit, even as it set aside $6m in capex reserves.

DCREIT reported a 183% rental reversion on new leases in Los Angeles and completed the acquisition of a 20% stake in Digital Osaka 3, which is expected to be accretive to FY24 earnings. Management is also exploring the upgrade of its Singapore asset, SGP1, into an AI-capable data centre.

The hospitality segment was mixed. CapLand Ascott Trust (CLAS) recorded a 4% year-on-year increase in revenue per available room (RevPAR), led by strong performance in Australia, Japan, the UK, and the US.

In contrast, Far East Hospitality Trust (FEHT) saw a 6% drop in RevPAR due to a high base in 1Q24, which included major concerts and the Singapore Airshow. Despite the soft start, average occupancy for CLAS improved four percentage points to 77%.

Logistics REITs saw divergence across geographies. Frasers Logistics Trust (FLT) maintained full occupancy in Australia and Europe and posted a 33% rental reversion in Australia.

However, its China exposure dragged down performance, as Mapletree Logistics Trust (MLT) reported a -9.4% rental reversion in China for 4QFY25. “Management cautioned that a protracted trade war could affect demand for warehouse space,” UOBKH warned.

Lower interest rates have improved funding conditions. The 3-month SORA fell 51 basis points in 1Q25. KDCREIT’s cost of debt fell by 0.4 percentage points to 3.1%, whilst FEHT and FCT also saw declines in their borrowing costs.

UOBKH’s top picks include CICT, FCT, DCREIT, Parkway Life REIT, and CLAS. “Many blue-chip S-REITs have already corrected and are trading at attractive yields of 6–7%,” the analysts wrote.