In an update, Koh shares that domestic consumption has been boosted by the Singapore government’s CDC and SG60 vouchers, with Frasers Centrepoint Trust’s (FCT) management guiding for a positive rental reversion of between 8% to 9% on a full-year basis for the FY2025.
“Suburban malls located in the North region, namely Causeway Point, Northpoint City North Wing and the newly acquired South Wing, maintained full occupancy during the 3QFY2025,” writes Koh in his Aug 26 report.
He adds that FCT is planning a holistic asset enhancement initiative (AEI) for its Northpoint City asset, across both its north and south wings, after the REIT’s sponsor Frasers Property acquired two levels of the adjacent Yishun 10 asset.
Lendlease Global Commercial REIT (LREIT) also achieved a positive rental reversion of 10.2% in the FY2025, with its 313@Somerset and Jem assets reaching high-single digits and low-teens respectively. Koh notes that while the valuation for Jem has grown by 2%, so has LREIT’s Sky Complex in Milan, Italy at 8.7%.
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In the office space, REITs continue to benefit from the limited supply, which has continued to support positive rental reversion.
In the 1HFY2025, Keppel REIT achieved a positive rental reversion of 12.3%, with the REIT’s management confident of achieving double-digit reversion on a full-year basis for 2025. “It has backfilled 73% of space returned by BNP Paribas at Ocean Financial Centre in Singapore and four fitted suites built during its recent AEI at 255 George Street in Sydney,” writes Koh.
As a whole, the analyst sees that properties in Singapore continue to outperform.
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He writes: “CICT’s net property income (NPI) margin expanded to 73.6% in the 1HFY2025, compared with 72.7% for 2024, attributed to effective cost control and scale from focus on Singapore. It plans to commence AEI for Tampines Mall and Lot One Shoppers’ Mall in 4QFY2025.”
For Mapletree Pan Asia Commercial Trust (MPACT), its VivoCity asset is the REIT’s main growth driver with its NPI growth of 6% y-o-y and positive rental reversion of 14.7% in the 1QFY2026. Koh notes that the ongoing AEI in basement 2 will be completed by the end of 2025 and is expected to deliver a return on investment (ROI) of 10%.
He adds: “Management is in active discussion with a prospective new tenant, relocating from the central business district (CBD), for 1.5 floors of space at Mapletree Business City vacated by Google.”
On the other hand, certain REITs with hospitality portfolios have seen a temporary slowdown due to the “strong” Singapore dollar.
CapitaLand Ascott Trust’s (CLAS) portfolio revenue per available unit (RevPAU) grew 3% y-o-y to $159 in the 2QFY2025, driven by Australia, the UK and the US. Average occupancy improved 3 percentage points (ppts) y-o-y to 78%.
On this, Koh writes: “It continues to execute portfolio reconstitution with three additional AEIs — ibis Ambassador Seoul Insadong in South Korea, Citadines Republique Paris in France and Sotetsu Grand Fresa OsakaNamba in Japan, bringing the total number of AEIs to five.”
Meanwhile, he notes that Far East Hospitality Trust (FEHT) has “tactically reduced” room rates for its hotels to preserve occupancy at 79.8% in the 2QFY2025, resulting in the average daily rate declining 4.6% y-o-y.
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The acquisition of the REIT’s Four Points by Sheraton Nagoya asset was completed on April 25, contributing to a revenue of $1.6m in the period. Aggregate leverage was low at 32.8%, while debt headroom was sizable at S$330 million before hitting gearing of 40%.
Data centres are the brightest spot according to Koh, thanks to “unmatched” positive rental reversion.
Keppel DC REIT achieved a positive rental reversion of 51% in the 1HFY2025, largely for colocation leases at its SGP4 data centre in Singapore in the 2QFY2025, which accounted for 11% of rental income. The REIT’s management expects to maintain positive rental reversion at high single-to low double-digit levels in FY2026.
For Digi Core REIT’s (DCREIT) two data centres in Los Angeles, the US, occupancy improved 2 ppts q-o-q to 87.7% in the 2QFY2025. Both data centres currently serve a base of 60 to 70 enterprise customers. “A tenant at 8217 Linton Hall Road in Northern Virginia vacated upon lease expiry in June. Management intends to refurbish and re-lease the data centre, which was about 25% under-rented,” adds Koh.
REITs meanwhile, with a logistics portfolio, see a varied performance dependent on geography.
Frasers L&C Trust (FLT) sustained a “strong” positive double-digit rental reversion of 55.8% for new or renewal logistics leases based on an average versus the average basis in 3QFY2025. The vacant space at the 2 Tuas South Link 1 asset, Koh notes, was backfilled rapidly, reflecting strong demand for logistics space in Singapore.
Coming in not as strong was Mapletree Logistics Trust (MLT), which clocked a positive low single-digit rental reversion of 2.1% in the 1QFY2026, powered by Singapore and Japan. Its assets in China however incurred a negative rental reversion of 7.5% during the 1QFY2026.
Koh writes: “Management is hopeful of moderation towards neutral reversion over the next few quarters, but we are cautious as full-year nationwide rent is expected to decline 9.5% in 2025.”
As for CapitaLand Ascendas REIT (CLAR) with its diversified industrial portfolio, he notes that the REIT places emphasis on development and redevelopment projects. Its portfolio occupancy improved slightly by 0.3 ppts q-o-q to 91.8% in the 2QFY2025 due to successful backfilling for two logistics properties in Sydney, Australia.
“We like the 9 Tai Seng Drive (9TSD) acquisition for its attractive NPI yield of 7.1%; 9TSD has potential for rent uplift as it is 30% under-rented. CLAR has eight ongoing projects – developments, redevelopments and AEIs – in Singapore, the US and the UK worth $850 million in all,” writes Koh.
Overall, the UOBKH analyst is keeping his “overweight” call on S-REITs, noting that the sector benefits from recovery in liquidity triggered by upcoming rate cuts.
“Singapore is a safe haven due to persistent fiscal budget surplus as a result of its rules-based approach to public finance. It also benefits from having the lowest reciprocal tariff of 10%, which is significantly lower than neighbouring countries,” writes Koh.
The “flight to quality”, he adds, has led to the three-month compounded Singapore Overnight Rate Average (SORA) dropping by a “massive” 133 basis points (bps) to 1.74% in the 8MFY2025.
He writes: “Similarly, yield for 10-year Singapore government bond yield compressed 98 bps year-to-date to 1.88%. The lower government bond yield has expanded the yield spread by 78 bps to 3.82% in the 8MFY2025, which is about one standard deviation (s.d.) above long-term mean.”
Sector catalysts noted by Koh include a resilient Singapore economy benefitting from low reciprocal tariffs, as well as the pharmaceutical and semiconductor sectors potentially benefitting from preferential tariffs. Limited new supply for the logistics and retail segments in Singapore will also be a plus.
Conversely, risks include a secondary tariff being imposed on Russia, which results in punitive tariffs being levied on China and India for their purchase of energy products from Russia.
Koh recommends investors to “buy” blue chip S-REITs with specific catalysts, such as CLAR with his target price of $4.02, CLAS with a target price of $1.56, KDCREIT with a target price of $2.69, KREIT with a target price of $1.18 and LREIT with a target price of 79 cents.
As at 4.12pm, units in CapitaLand Ascendas REIT, CapitaLand Ascott Trust, Keppel DC REIT, Keppel REIT and Lendlease Global Commercial REIT are trading at $2.73, 87.5 cents, $2.33, 97 cents and 59.5 cents respectively.
