This marks the second upward revision this year, following an earlier increase in January, and a considerable shift from the 0.5-1.5% outlook projected in October last year.
From Tan's perspective, rising inflation is a clear tailwind for PREIT.
Under its lease agreement structure, 65% of its revenue is derived from Singapore hospitals under an inflation-linked rental structure of Consumer Price Index + 1% formula, which embeds structural upside in a higher inflation environment.
"While a shift to base-plus-variable rent, which is contingent on stronger post-AEI performance at Mount Elizabeth Orchard remains a potential kicker, we await clearer data points before revising assumptions sometime in middle of 2026," says Tan.
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This hospital, the REIT's flagship property, recently completed an extensive multi-year refurbishment which means it can now resume at operating at full capacity.
Tan believes that the higher 2026 inflation outlook should feed directly into stronger FY2027 rent growth, implying potential upside to his estimates of around 0.4–1.6%.
"Parkway Life REIT stands out as the only Singapore REIT with income visibility to 2042, offering a rare combination of certainty and inflation-plus growth. Recent share price weakness presents an attractive entry point," says Tan, noting that this stock now trades at around 1.5x forward P/B with a 4.5% forward yield.
Tan's call remains "buy" with a target price of $4.75.
Parkway life REIT units, as at 11.07 am, was up 0.25% to trade at $4.02.
