S-REITs Outlook: Selectivity is key

• Logistics S-REITs would remain resilient amidst US tariffs and global trade tensions, supported by Singapore’s relatively lower tariff burden relative to regional peers, and its potential to emerge as a rerouting hub.
• On the other hand, data centre S-REITs will see strong AI-driven demand despite power and regulatory constraints.
• That said, investors should remain watchful of trade tensions and geopolitical risks, which could introduce volatility.
• We recommend investors to adopt a selective approach and choose well-managed S-REITs with resilient balance sheets and the capability to capitalise on structural tailwinds.
• For investors seeking a diversified approach, the Lion-Phillip S-REIT ETF (SGX:CLR) and NikkoAM-StraitsTrading Asia ex Japan REIT ETF (SGX: CFA) can be considered.

At the start of 2024, markets anticipated around six Fed rate cuts. However, persistent inflation and strong economic data led to a downward revision of expectations, creating volatility for S-REITs. Higher-for-longer rates weighed on valuations and refinancing costs.

As the year progresses, the sector rebounded on the back of greater confidence in a potential Fed rate cut. The Fed eventually delivered its rate cut in September, but the upward momentum was short-lived as uncertainties emerged regarding the Fed’s future rate path (Figure 1).

Fast forward to today, imposition of sweeping US tariffs and retaliatory actions from countries like China has introduced a fresh layer of macro uncertainty, weighing on global investor sentiment. In this article, we identify the sectors which are likely to remain resilient against the current macroeconomic backdrop.

Figure 1: Investor sentiment improved between June and September due to higher possibility of Fed rate cut

Related article: A full rebound for Singapore REITs may be premature despite first Fed rate cut

Related article: Valuation of S-REITs looks seemingly cheap, should we all be in?

Related article: Be selective in S-REITs as rates stay higher for longer

Related article: US office S-REITs in shambles

S-REITs Outlook for 2025 – Key Themes & Opportunities

A leveraged sector like S-REITs is expected to remain volatile this year, fuelled by trade tensions which would keep rates higher for longer. Our top sector picks are industrial/logistics and data centres. While we see opportunities in these segments, investors should remain selective, prioritising S-REITs with resilient balance sheets and the ability to capture structural tailwinds.

• Industrial & Logistics S-REITs – Resilient amid US tariffs and global trade tensions

In 2024, vacancy rates for Singapore warehouses fell from 8.9% at the start of the year to 8.5% in 4Q24. This led to a 1.4% YoY growth in gross rent (Figure 2). Moreover, among other industrial properties, warehouses continued to lead the growth in the broader industrial property rental index on a QoQ basis (Figure 3).

Figure 2: Warehouses remain in demand

Figure 3: Rental index for industrial properties continued to grow, with warehouses leading QoQ

Fast forward to 2025, the imposition of new tariffs by the US, including a 10% levy on Singapore exports, has reignited concerns about the impact of rising trade protectionism on global supply chains. Yet, Singapore’s logistics sector, a cornerstone of its export-driven economy, should be resilient.

Singapore’s direct export exposure to the US remains relatively modest, at around 13% (10Y average: 11%) of total exports for the first two months of this year (Figure 4). While US-bound trade may take a slight hit, the impact is likely to be less severe than that experienced by regional peers such as Vietnam, Malaysia or Indonesia (Figure 5).

Figure 4: US makes up only 13% of Singapore’s exports for the first two months of this year

Figure 5: Singapore faced a lighter tariff burden relative to regional peers

This comparatively lighter tariff burden makes Singapore’s exports more cost-competitive, which may position the country as a stable and reliable trade partner in the eyes of US buyers.

Moreover, Singapore may emerge as a rerouting hub. Previously, Chinese goods were often rerouted through Vietnam before being shipped to the US. However, with Vietnam now subject to a steep 46% tariff, exporters may look to Singapore as a rerouting hub. This rerouting could result in increased transshipment volumes through Singapore’s ports and air freight infrastructure, offsetting declines in direct exports.

Additionally, as businesses reassess their global supply chains in light of rising geopolitical and trade tensions, Singapore stands to benefit from its reputation for stability, transparency, and robust infrastructure. For instance, firms looking to diversify away from more heavily tariffed markets may view Singapore as an attractive alternative — not just for transshipment, but also as a base for value-added logistics services, light manufacturing, and regional distribution.

This repositioning could lead to:

• Increased demand for logistics warehousing
• Higher amount of goods passing through (throughput) in free trade zones
• More investment in smart logistics and supply chain technologies

Despite the macroeconomic uncertainty, Singapore’s logistics ecosystem remains agile:

• The Port of Singapore continues to rank among the world’s busiest.
• Changi Airport is expanding its air cargo capabilities.
• The full completion of Tuas Megaport (targeted 2040s) will cement Singapore’s status as a global shipping and logistics powerhouse.

Additionally, Singapore’s participation in multilateral trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP) further strengthens its connectivity and trade resilience.

In short, while US tariffs pose risks to global trade, Singapore’s logistics sector is well-positioned to weather the storm. The combination of lower tariff exposure, strategic location, and growing relevance in supply chain diversification means the sector may not only withstand the current wave of protectionism but also find opportunities within it.

As global manufacturers and buyers pivot toward more stable, transparent, and strategically located hubs, Singapore is likely to emerge as a critical node in the next era of global trade. Hence, we see higher occupancy rates and greater rental reversions for S-REITs with exposure to industrial/logistics assets located in Singapore (Table 1).

Related article: CapitaLand Ascendas REIT: Capitalising on the growth of digitalisation and e-commerce

Table 1: Large S-REITs with industrials and/or logistics exposure in Singapore

S-REITs with industrials / logistics exposure in Singapore^	Gross Revenue attributed to industrials / logistics assets in Singapore
CapitaLand Ascendas REIT	34%
Mapletree Industrial Trust*	58%
^Only S-REITs with more than SGD 5 billion as of 4 Apr 2025 and having more than 30% of their gross revenue is from logistics and industrial assets located in Singapore are included in this table *Instead of full-year numbers, Mapletree Industrial Trust is based on 9 months' gross revenue. Source: Latest company filings Data as of 31 December 2024

• Data Centre S-REITs – AI & cloud computing are fueling unprecedented demand for data center capacity

Another sector poised to continue to experience significant growth is data centre (DC) S-REITs. This is especially so with the increasing adoption of artificial intelligence and cloud computing. AI applications such as ChatGPT and autonomous technology, require high-density computing which could lead to higher power requirements per rack. Moreover, DeepSeek has highlighted the rapid pace of AI innovation which could enhance cost-efficiency in training new AI models and, in turn, accelerate AI adoption.

Related article: Nasdaq enters correction – should investors be concerned?

Singapore's hyperscaler data centre (DC) market is projected to grow significantly at a CAGR of 11.3% —from USD 639.51 million in 2023 to USD 1.7 billion by 2032—driven by sustained demand from major tech firms like Alphabet, Microsoft, and Amazon, which maintain regional headquarters here.

Despite strong demand, DC supply in Singapore remains limited due to land and regulatory constraints, including a moratorium on new DCs to manage energy consumption. New DCs must now meet stringent energy efficiency standards before construction.

This has prompted DC-focused S-REITs to expand into overseas markets such as North America, Europe, and Japan. For example, Mapletree Industrial Trust acquired DC assets in Osaka and Tokyo in 2023–2024. Globally, DC capacity is projected to grow 15% annually from 2023 to 2027, still falling short of demand.

As sustainability becomes increasingly important, ESG-compliant, energy-efficient DCs will be a key focus area. S-REITs like Keppel DC REIT are already aligning with this trend—its recent full acquisition of Keppel Data Centre Campus in Singapore includes infrastructure designed to reduce energy and water usage, reflecting a broader industry push toward green DC operations.

Within our local stock market, Keppel DC REIT and Digital Core REIT are pure-play DC S-REITs while Mapletree Industrial Trust, a diversified S-REIT, has sizable exposure to DCs (Table 2).

Table 2: S-REITs with DC exposure

S-REITs with large DC exposure*	Geographical exposure of DC in terms of AUM	DC as a % AUM
Keppel DC REIT	Singapore (65.3%) Ireland (6.1%) China (5.5%) and others	100.0% of SGD 5 billion
Digital Core REIT	US (51%) Germany (30%) and others	100.0% of SGD 1.6 billion
Mapletree Industrial Trust	North America (82.5%) Japan (11.8%) Singapore (5.7%)	55.9% of SGD 9.2 billion
*Note: Large DC exposure refers to S-REITs with more than 50% of their AUM in DCs. CapitaLand Ascendas REIT (9%) and CapitaLand India Trust (15%) are excluded from this table. Source: Latest company filings. Data as of 31 December 2024.

Risks to monitor in 2025

• Inflation: With the ongoing trade policy uncertainties, inflation risk is likely to remain high. This could suggest high-for-longer rates which could continue to weigh further on this leveraged sector.
• Geopolitical Tensions: Disruptions in global trade routes (e.g., Red Sea tensions) may impact logistics and supply chains.
• Weak Economic Growth: Expectations of slower global economic growth brought about by Trump’s trade policies could impact demand across sectors. For instance, discretionary retail spending could weaken, thereby slowing the demand for goods, which may impact logistics S-REITs.

Stay selective, select S-REITs with greater resilience in 2025

With valuations seemingly attractive as the FTSE ST REIT Index currently trades close to two standard deviations below its 10-year average forward P/B ratio (Figure 6) and yield spreads improving relative to 2022 levels (Figure 7), investors may consider if it is an opportune moment to build up positions in this sector.

Figure 6: FTSE ST REIT Index is currently trading close to two standard deviations below its 10-year average forward P/B ratio

Figure 7: Yield spreads have widened from 2022 levels

Logistics S-REITs stand to remain resilient in light of US trade tariffs and global trade tensions, while data centre S-REITs will see strong AI-driven demand despite the power and regulatory constraints.

That said, investors should remain watchful of trade policy uncertainties, geopolitical risks, and consumer spending trends, which could further increase volatility. With the ongoing trade tensions, we expect further volatility in this sector this year.

A selective approach will be key — we recommend investors to focus on well-managed S-REITs with resilient balance sheets and the capability to capitalise on structural tailwinds such as CapitaLand Ascendas REIT (SGX:A17U), Mapletree Industrial Trust (SGX:ME8U) and Keppel DC REIT (SGX:AJBU).

For investors seeking diversified exposure to S-REITs, ETFs can be considered (Figure 8):

• Lion-Phillip S-REIT ETF (SGX: CLR) tracks the Morningstar Singapore REIT Yield Focus Index, with highest exposure to industrial S-REITs (39.50%) and some exposure in data centres (9.40%). Its top holdings—such as CapitaLand Ascendas REIT and Mapletree Industrial Trust—are well-positioned for long-term growth.
• NikkoAM-StraitsTrading Asia ex Japan REIT ETF (SGX: CFA) offers broader regional exposure by tracking the FTSE EPRA Nareit Asia Ex Japan Index. Despite its regional mandate, it maintains a strong 70.30% allocation to S-REITs. It shares similar top holdings with CLR and has its second largest sector weight in industrial REITs (26.90%) and some exposure in data centres (5.10%).

Figure 8: Both ETFs have the largest exposure to Industrial and Retail REITs

Sector	Recommended Product
Singapore REITs	Lion-Phillip S-REIT ETF (SGX:CLR)
Asia Ex Japan REITs	NikkoAM-StraitsTrading Asia ex Japan REIT ETF (SGX:CFA)

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.