- Easing interest rates and lower SORA are beginning to translate into improving interest coverage ratios and cost of debt across S-REITs.
- Capital market activity has picked up, with renewed acquisition and divestment momentum as the cost of capital improves.
- A selective approach with emphasis on high-quality suburban retail, prime commercial and industrials offers the most compelling risk-reward profile.
- Prospective ETFs tracking the iEdge Singapore Next 50 Index, in which S-REITs account for 16 constituents, may shine a spotlight on mid-cap names.
- Even after a strong 16.9% rally last year, valuations remain reasonable, as the sector trades at a price-to-book ratio of 0.99X as of 20 January 2026.
The S-REITs sector is finally emerging from a prolonged period of macro headwinds characterised by elevated interest rates, which pushed up financing costs and forced REITs to be cautious with acquisitions and growth plans.
With interest rates easing, the yield advantage that S-REITs offer is becoming attractive once again. More importantly, fundamentals are also improving. Rental conditions remain stable across key domestic sectors, and the re-opening of capital markets has encouraged managers to resume growth-oriented strategies that were paused over the last two years.
While part of the recovery has already been priced in, with the sector rallying double-digits last year (their best annual performance since 2019), we believe the longer term outlook remains favourable. Selectivity is still essential, but investors are now positioned to benefit from improving income visibility, benign refinancing conditions, and potential uplift from index-driven passive flows.
Figure 1: Total return of FTSE ST REIT Index in 2025 (%)
Easing interest rates offers greater relief for some
One of the most encouraging signs for S-REITs is that the benefits of a lower interest-rate environment are finally showing up in their financials. This is seen by improving interest coverage ratios and all-in borrowing costs, easing pressure on cash flows.
It is important to note that, as many REITs stagger their debt maturities and hedge a large portion of borrowings, the impact of rate cuts tends to be gradual. That said, with a notable share of debt set to mature from now till 2027, refinancing at lower marginal costs will increasingly support earnings.
Not all REITs will benefit equally. Those with stronger balance sheets, lower gearing, and diversified currency exposure will benefit earlier and more meaningfully. Examples include CapitaLand Integrated Commerical Trust (CICT) (SGX: C38U) and Frasers Centrepoint Trust (FCT) (SGX: J69U) as shown in Table 1.
Table 1: Improving interest coverage ratio and all-in interest rate seen in some S-REITs
|
|
As of 30 Jun 2024 (before Sep’24 Fed rate cut) |
As of 30 Sep 2025 (after six Fed rate cuts) |
||||
|
S-REITs |
Leverage ratio |
Interest coverage ratio |
All-in interest rate |
Leverage ratio |
Interest coverage ratio |
All-in interest rate |
|
39.8% |
3.0X |
3.5% |
39.2% |
3.5X |
3.3% |
|
|
39.1% |
3.3X |
4.2% |
39.6% |
3.5X |
3.5% |
|
|
40.5% |
2.8X |
3.5% |
37.6% |
3.0X |
3.2% |
|
|
42.3% |
1.9X |
4.0% |
41.0% |
2.0X |
3.6% |
|
|
Source: Company Filings. Data as of 30 Sep 2025. |
||||||
Capital market activity and acquisitions are returning
Beyond easing balance sheet pressures, the shift toward lower interest rates is also reviving capital-recycling activity in the REIT sector after nearly two years of subdued growth. REIT managers are once again pursuing accretive acquisitions, divesting non-core assets, and tapping equity markets when pricing is favourable. This renewed momentum reflects improving investor confidence and lower capital costs, enabling well-capitalised REITs to execute growth strategies that were previously delayed.
REITs with strong sponsors and disciplined balance sheets are particularly well-positioned to capitalise on this environment. This includes REITs managed by CapitaLand, Mapletree, and Keppel which benefit from deep sponsor pipelines, access to private portfolios.
CapitaLand Ascendas REIT has demonstrated disciplined capital recycling through the divestment of five assets across Singapore, Australia and the US, including the sale of Parkside in the US at a 45% premium to valuation, while recycling capital into higher-quality growth assets such as the fully leased acquisitions at 9 Tai Seng Drive and 5 Science Park Drive, as well as the SGD 883 million redevelopment of 1 Science Park Drive. According to CLAR, if both acquisitions were acquired at the start of 2024, they would have contributed to FY24 DPU accretion of 1.24% and 0.14%, respectively.
Similarly, Mapletree Industrial Trust has continued to reshape its portfolio by divesting mature Singapore assets while redeploying capital into higher-specification properties, including a freehold asset in Tokyo and the completion of its Osaka data centre, reinforcing its pivot toward more resilient, technology-oriented assets. Higher contributions from these two assets mitigated the overall decline in net property income in 3Q25.
Meanwhile, Keppel DC REIT has capitalised on its strong balance sheet to drive growth through acquisitions, including Singapore Data Centre 7 and 8 and a Tokyo data centre, underpinning robust NPI growth of 42.2% YoY for the first nine months of 2025 and validating the return of earnings-accretive capital deployment in the sector.
S-REITs with higher exposure to Singapore have shown stronger performance
In general, S-REITs with larger exposure to Singapore assets performed stronger than S-REITs with greater foreign exposure. This reflects stronger tenant demand and more stable leasing conditions in Singapore.
For example, CapitaLand Integrated Commercial Trust (CICT), which has about 95% of its gross revenue coming from assets in Singapore, continues to report positive rental reversions across its retail and office portfolio.
By contrast, Mapletree Pan Asia Commercial Trust (MPACT), with only about 57% of its gross revenue (as of 30 Sep 2025) coming from its assets in Singapore, has seen a decline in overall rents due to its foreign exposure. While its Singapore asset, VivoCity, remains the key earnings anchor and has delivered double-digit positive rental reversions in recent quarters, this has been offset by weaker rental reversions from its China and Hong Kong properties. As a result, MPACT’s rental growth has been softer.
Overall, the comparison reflects why we continue to favour S-REITs with a higher concentration of Singapore assets, especially amidst ongoing uncertainty in overseas markets.
Table 2: Resilience among Singapore assets
|
S-REITs |
Sub-sector |
As of 30 Sep 2025 |
|
|
% of gross revenue coming from Singapore |
Rental reversion |
||
|
Retail and Commercial |
95%* |
6.5% - 7.8%^ |
|
|
57% |
-0.1% |
||
|
Industrials |
76% |
+7.7% |
|
|
66%* |
+7.6% |
||
|
29% |
+0.6% |
||
|
Source: Company Filings. *as of 30 June 2025. ^CICT’s rental reversion reflects the nine months ended 30 Sep 2025. Data as of 30 Sep 2025. |
|||
We prefer sectors such as industrials, logistics and commercial
Industrial S-REITs with modern logistics and high-spec industrial assets
Singapore’s industrial and logistics market continues to display exceptional strength, supported by sustained rental growth, tightening occupancies, and firm demand from manufacturers, third-party logistics (3PL) operators and technology tenants.
The JTC All Industrial Rental Index recorded its 20th consecutive quarter of increase, rising 0.5% QoQ in 3Q25. Since the market bottomed in 3Q20, rents have expanded at a CAGR of 4.6%, underscoring how the sector has remained one of the most consistently expanding corners of the real estate market even through global volatility.
Figure 2: Warehouse rents grew the most in 3Q25
Within the broader industrial landscape, logistics assets are leading the outperformance.
Warehouse rents accelerated to 0.9% QoQ in Q3, supported by the strongest net absorption since 2Q23 and a moderation in new completions. Occupancy climbed 0.8% to 89.6%, further buoyed by robust take-up from major 3PL firms.
Prime logistics assets also saw meaningful tightening, with occupancy rising from 92.1% to 93.6% within a quarter as demand for high-spec ramp-up and modern warehouse space intensified. Recent additions such as CapitaLand Ascendas REIT’s new six-storey redevelopment at 5 Toh Guan Road East underline how landlords continue to invest in modernising supply, a trend that supports both rental resilience and long-term competitiveness.
In 3Q25, S-REITs with industrial exposure, such as CapitaLand Ascendas Trust and Mapletree Industrial Trust, have also shown healthy rental reversions.
Table 3: Occupancy rate and rental reversions across industrials S-REITs
|
S-REITs |
Sub-sector |
As of 30 Sep 2025 |
|
|
Occupancy rate |
Rental reversion |
||
|
Industrials |
91.3% |
+7.6% |
|
|
96.1% |
+0.6% (+2.5% ex China) |
||
|
91.3% |
+6.2% (for Singapore portfolio) |
||
|
95.1% |
+29.5%* |
||
|
Source: Company filings. *FLCT’s rental reversion reflects the full year ended 30 Sep 2025 Data as of 30 Sep 2025. |
|||
Looking ahead, the outlook for industrial and logistics assets remains firmly positive. Global AI investment is driving sustained requirements for semiconductor-related manufacturing and high-specification facilities, while the logistics sector continues to benefit from strong 3PL expansion and supply constraints in the prime warehouse segment.
With new supply moderating sharply and landlords doubling down on upgrading older assets, Singapore’s industrial and logistics market is well-positioned for further rental growth and capital appreciation. Moving forward, REITs exposed to modern logistics and high-spec industrial assets such as CapitaLand Ascendas Trust and Mapletree Industrial Trust, these structural tailwinds provide a robust underpinning for earnings resilience heading into 2026.
Commercial S-REITs with Grade A assets in the Central Business District (CBD)
Despite the global economic backdrop remaining uncertain, Singapore’s office market has continued to show resilience, supported by steady leasing momentum and a clear, persistent flight to quality. Vacancy rates in the Core Central Business District (CBD) (Grade A) have tightened from 5.9% in 1Q25 to 5.1% in 3Q25, reflecting the preference for well-located, modern office spaces even as cost considerations rise. Companies continue to consolidate into better buildings rather than downgrade, signalling that quality offices remain a core part of workplace strategy.
This preference is most clearly seen in the strong performance of IOI Central Boulevard Towers, the last major Grade A completion in the Core CBD until 2028. The development reached about 90% commitment by 3Q25, underscoring the depth of demand for premium office space in the heart of the city. Its successful take-up demonstrates that firms are willing to sign leases early to secure future-proof, high-specification space, especially as new supply tightens in the years ahead.
Prime locations such as Marina Bay and Raffles Place continue to attract the strongest interest, benefiting from their connectivity, sustainability credentials and the ability to accommodate large corporate tenants. This is also evident in QoQ improvement in occupancy rates for Keppel REIT and CapitaLand Integrated Commercial Trust.
Neighbouring submarkets like Marina Centre and the Beach Road/City Hall corridor have also performed exceptionally well, with vacancy rates falling below 3% in 3Q25. This reflects broad-based strengthening across the CBD fringe, where high-quality assets remain scarce and competition among tenants has intensified.
This tightening backdrop, combined with the absence of significant new Grade A supply until 2028, sets the stage for a gradually improving outlook for Singapore offices. This trend would likely favour landlords with greater portfolio exposure to quality assets (i.e. Core CBD Grade A assets) like CapitaLand Integrated Commercial Trust.
CICT’s portfolio includes assets like Asia Square Tower 2, CapitaSpring, CapitaGreen, Capita Tower, as well as 70% interests in CapitaSky and Six Battery Road. It also owns integrated developments that directly benefit from office worker footfall, including Funan and Raffles City. Moreover, in terms of balance sheet health, CICT has a relatively healthier leverage (39.2%) and interest coverage ratio (3.5X) compared to other commercial S-REITs (Suntec REIT: 41%, 2.0X, Keppel REIT: 42.2%, 2.6X).
Table 4: Singapore Office Vacancy Rates
|
1Q25 |
2Q25 |
3Q25 |
|
|
Core CBD (Grade A) |
5.9% |
5.3% |
5.1% |
|
Islandwide |
5.9% |
6.1% |
5.7% |
|
Core CBD |
5.4% |
5.0% |
4.9% |
|
Fringe CBD |
6.8% |
6.8% |
6.5% |
|
Decentralised |
6.2% |
7.9% |
6.5% |
|
Source: CBRE. Data as of 30 Sep 2025 |
|||
Table 5: Occupancy rate and rental reversions across commercial S-REITs
|
S-REITs |
Commercial exposure* |
As of 30 Sep 2025 |
|
|
Occupancy rate |
Rental reversion for the quarter |
||
|
100% |
96.3% |
+12.0%2 |
|
|
71% |
98.5%3 |
+8.5%3 |
|
|
65%1 |
96.2%3 |
+6.5%2 |
|
|
50%4 |
88.9% |
-0.1% |
|
|
48% |
95.3%3 |
+9.3%3 |
|
|
Source: Company filings. *includes both offices and business parks 140% comes from Office, while 25% comes from Integrated Development, which are well-located in / near office districts (for instance, Funan, Raffles City, Plaza Singapura) 2Both KEIT’s and CICT’s rental reversion reflect the nine months ended 30 Sep 2025. 3for office portfolio 4as of its latest annual report dated 31 March 2025 Data as of 30 Sep 2025. |
|||
We hold less preference for retail and hospitality
Retail S-REITs continue to benefit from a steady recovery (stable occupancy and strong rental reversions), although the outlook suggests a clearer advantage for suburban assets.
Retail sales rose 6.3% YoY in November 2025, marking the ninth month of expansion and reflecting broad-based improvements across most categories, including watches and jewellery, motor vehicles and recreational goods. Excluding motor vehicles, retail sales grew only by 0.8% YoY in November, slowing from October’s 3% YoY growth. Despite the growth in retail sales, sentiment remains cautious. Many employers are holding off on significant wage increases, which may prompt consumers to be more selective with discretionary spending in 2026.
Against this backdrop, suburban and heartland malls are expected to show greater resilience than their downtown counterparts. These malls cater primarily to essential and day-to-day spending, supported by stable residential catchments where footfall is less sensitive to shifts in consumer sentiment. Vacancy rates remain low, new supply is limited, and this keeps the market tight, enabling landlords to maintain healthy rental reversions. Suburban-focused retail S-REITs are therefore positioned to navigate a more cautious spending environment with better stability and visibility.
Prime Orchard rents continue to recover gradually as tourism improves and new-to-market brands seek flagship visibility. However, their performance remains more exposed to external variables such as tourist arrivals and the strong SGD, which may soften luxury goods and discretionary spending. As such, hospitality S-REITs may face headwinds, with RevPAR performance strongly influenced by tourism flows and room-supply dynamics.
Table 6: Prime retail rents are improving
|
Location |
Occupancy |
Average rent per sq ft per month in 3Q25 |
QoQ |
YoY |
|
Orchard Road |
93.1% (-0.1pp QoQ) |
SGD 38.35 |
+0.7% |
+2.4% |
|
Suburban |
94.8% (+1.3pp QoQ) |
SGD 32.65 |
+0.5% |
+1.7% |
|
Source: CBRE, Colliers. Data as of 30 Sep 2025. |
||||
While Orchard’s recovery is encouraging, the more defensive nature of suburban malls makes them the clearer beneficiaries in a year where consumers may prioritise essential purchases. A pure-play suburban retail S-REIT like Frasers Centrepoint Trust is likely to remain resilient amongst the retail S-REITs, supported by resilient local demand, tight supply and stable occupancy.
Table 7: Occupancy rate and rental reversions across retail S-REITs
|
S-REITs |
Retail exposure |
As of 30 Sep 2025 |
|
|
Occupancy rate |
Rental reversion |
||
|
100% (pure-play suburban retail) |
98.1% (99.9% excluding Cathay Cineplexes) |
+7.8% for the full year ended 30 Sep 2025 |
|
|
35% (55/45 mix of downtown and suburban) |
98.7%1 |
+7.8%1 for the nine months ended 30 Sep 2025 |
|
|
28% (downtown, VivoCity) |
100%2 |
+14.1%2 |
|
|
24% (downtown, Suntec City Mall) |
99.3%1 |
+8.6%1 |
|
|
Source: Company filings. 1for retail portfolio 2for VivoCity Data as of 30 Sep 2025. |
|||
Valuations are still reasonable
Despite a 16.9% rally last year, the S-REIT sector continues to trade at a price-to-book ratio of 0.99x, broadly in line with its 10-year average.
Figure 3: The index continues to trade below its 10-year average
Forward yields remain robust in the 5.4% range. With 10-year bond yields expected to drift lower, the yield spread between REITs and bonds is widening again (3.2% as of 20 January 2026), reinforcing their appeal to yield-oriented investors. This contrasts with the February 2023 trough, when tight spreads of around 2.7% reduced the sector’s attractiveness. The combination of discounted valuations, improving yield spreads, and recovering cash flow growth provides a supportive backdrop for price appreciation and capital inflows.
Figure 4: Yield spreads between S-REITs and SGS 10-year government bonds are widening beyond 2023-2024 levels
iEdge Singapore Next 50 Index could boost mid-cap S-REIT visibility
A structural catalyst for the sector lies in the newly launched iEdge Singapore Next 50 Index, which includes 16 S-REIT constituents out of 50. As of 31 December 2025, the REITs sector accounted for almost half of the index earnings. The index is designed to complement the Straits Times Index (STI) by showcasing the next generation of Singapore-listed companies, including mid-cap REITs that typically receive less attention and liquidity compared to the established large-caps.
Table 8: S-REITs within the iEdge Singapore Next 50 index
|
|
S-REIT within the index |
|
1 |
|
|
2 |
|
|
3 |
|
|
4 |
|
|
5 |
|
|
6 |
|
|
7 |
|
|
8 |
|
|
9 |
|
|
10 |
|
|
11 |
|
|
12 |
|
|
13 |
|
|
14 |
|
|
15 |
|
|
16 |
|
|
Source: SGX. Data as of 31 December 2025. |
|
Figure 5: Real estate holds the largest sectoral weight within the index
With the potential for new ETFs and index-linked products tracking this benchmark, passive inflows may increasingly channel into these mid-cap REITs. This can help narrow valuation gaps, improve trading liquidity, and amplify institutional visibility. Over time, these flows could support total returns for REITs with solid fundamentals but limited coverage, offering investors a way to tap into the next tier of growth-potential names beyond the familiar blue-chip REITs.
Stay selective
Overall, the outlook for S-REITs entering 2026 is increasingly constructive. The sector is benefiting from easing interest rates, improving cash flows, resilient rental fundamentals, and increasing capital market activity. Valuations remain reasonable despite the rebound, and yield spreads are widening again, enhancing the appeal of the sector for income-focused investors.
That said, the recovery will not be uniform. Sub-sector resilience varies, and balance-sheet strength remains crucial. A selective approach with the emphasis on high-quality suburban retail, prime commercial and industrials offers the most compelling risk-reward profile.
Some names we like include CapitaLand Ascendas REIT (SGX: A17U), Mapletree Industrial Trust (SGX: ME8U), CapitaLand Integrated Commercial Trust (SGX: C38U) and Frasers Centrepoint Trust (SGX: J69U).
For investors who are looking for diversified exposure, we recommend the Lion-Phillip S-REIT ETF (SGX: CLR). The ETF seeks to track the Morningstar Singapore REIT Yield Focus Index, which is designed to screen for high-yielding REITs with superior quality and financial health.
From a valuation standpoint, we derive a fair P/B multiple of 1.02X, based on the assumptions of a 6.50% ROE (consistent with the index’s long term historical average), terminal growth rate of 1.80% and cost of equity of 6.43%, which we view as justified by improved asset quality and disciplined balance sheets. Applying this fair P/B multiple to its forecasted book value yields a target price of SGD 0.93, representing approximately 4.9% upside from the closing price on 20 January 2026 alongside an average annual dividend yield of 5.6%.
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