Limited supply of offices in Singapore supports positive rental reversion, says UOB Kay Hian analyst Jonathan Koh.
Keppel REIT, for example, targets double-digit positive rental reversion in both 2025 and 2026. It has backfilled 73% of the space returned by BNP Paribas at Ocean Financial Centre and achieved strong doubledigit rental reversion for new tenants from the financial services, legal, and technology, media and telecommunications sectors.
Keppel REIT intends to remain Singaporecentric and office-focused. It will cap the exposure to retail assets at 20% of its portfolio valuation.
Two giants become one?
Interestingly, talk emerged during the quarter of a merger of “two giants”, notes Koh — the CapitaLand and Mapletree groups.
In a Nov 27 note, Koh says Mapletree Pan-Asia Commercial Trust (MPACT) will likely be acquired by CICT if CapitaLand Investment (CLI) merges with unlisted Mapletree Investments.
CICT’s office occupancy improved 1.6 percentage points (ppt) q-o-q to 96.2% in 3Q2025, driven by new tenants at 100 Arthur Street in North Sydney and MAC in Frankfurt. It benefits from a full year’s contribution of its 50% stake in Ion Orchard this year — the acquisition was completed on Oct 30, 2024 — while CapitaSpring would contribute based on 100% interest starting from Aug 26 this year.
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Meanwhile, MPACT’s VivoCity reported positive rental reversion of 14.1% and growth in tenant sales of 4.8% y-o-y in 2QFY2026 ended Sept 30, despite disruption from the ongoing assets enhancement initiative (AEI).
MPACT’s Mapletree Business City in Singapore registered net property income (NPI) growth of 4.2% y-o-y in 2QFY2026, though it incurred a slight negative rental reversion of 2.9%.
Mapletree Industrial Trust (MINT) posted a distribution per unit (DPU) of 3.18 cents for 2QFY2026, down 5.6% y-o-y; while Mapletree Logistics Trust (MLT) posted a 2QFY2026 DPU of 1.815 cents, 10.5% lower y-o-y.
Excluding MINT and MLT, REITs under Maybank’s coverage reported an average y-o-y DPU increase of 1.5%.
Maybank’s picks
In fact, most REITs delivered key reporting metrics ahead of Maybank’s estimates, with Frasers Centrepoint Trust (FCT), AIMS APAC REIT (AAREIT) and Parkway Life REIT (PREIT) in line.
In contrast, Keppel REIT, Keppel DC REIT, and CDL Hospitality Trusts (CDLHT) missed forecasts.
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Hedge ratios have risen, warn Guha and Liu. In some cases, refinancing of legacy debt and hedges appears to be extending longer than anticipated, they add.
Still, Singapore valuations remain resilient, though net asset values (NAVs) slipped due to one-off factors and foreign exchange movements, according to Maybank’s analysts.
“Recent investor discussions have focused on marginal increases in three-year SGD swap rates, potential downside risks to asset values and possible churn among major tenants.”
Macro conditions remain conducive for the S-REIT sector, they add. “Our macro team recently raised the 2025 GDP growth forecast to 4.1% from 3.5%. The SGD base rate (three-month Singapore Overnight Rate Average) declined 15 basis points (bps) over the past month to 1.24%, trending towards Maybank’s year-end forecast of 1.1%. Meanwhile, the 10-year yield has remained relatively stable at around 1.9%.”
The sector offers a 370 bps spread over the 10-year yield, which has widened to about one standard deviation above the historical mean, according to the analysts.
Guha and Liu upgraded AAREIT, ESR REIT, OUE REIT, and Suntec REIT following the recent results and their top picks remain unchanged: CICT, CapitaLand Ascendas REIT (CLAR), CapitaLand Ascott Trust (CLAS), MLT, MPACT and PREIT.
MLT’s rental reversion sinks
UOB Kay Hian’s Koh held a higher bar for REITs, with only two of the 16 large-cap S-REITs under his coverage surpassing expectations. The majority, or 12 of the 16, met expectations, while CDLHT and MINT missed Koh’s forecasts.
Koh notes “tight vacancy” among data centres in Singapore due to limited supply. Keppel DC REIT clocked a positive rental reversion of 10% in 3Q2025, driven mainly by lease renewals in Dublin. It plans to invest $53.9 million to fit out half a floor at SGP8 to build one data centre hall, which will increase revenue contribution from SGP8 by 15% upon completion in 3Q2027.
Meanwhile, MINT’s NPI dropped 7.8% y-o-y in 2QFY2026, due to the divestment of three Singapore properties and lower contributions from its North American portfolio.
MINT is undertaking a strategic divestment of its North American portfolio and could dispose of data centres worth $500 million to $600 million over the next two years, Koh adds.
On the logistics front, Australia thrived, but China languished, says Koh.
Frasers Logistics & Commercial Trust (FLCT) achieved strong positive rental reversion for logistics properties in Australia (New South Wales: 49.7%, Victoria: 55.7%) and Germany (Amberg: 6.5%).
Occupancy for logistics properties in Australia gained 4.3 ppts q-o-q to 100% in FLCT’s 4QFY2025 ended Sept 30, driven by third-party logistics, as well as transport and freight tenants.
Committed occupancy at Alexandra Technopark improved 3.6 ppts q-o-q to 77.9% in 4QFY2025 after backfilling 58% of ex-Google space, up from 54% in end-June. Two additional leases were signed, bringing backfilling post-quarter end to 83%.
Meanwhile, MLT saw negative rental reversion in China moderate from –7.5% in the previous quarter to –3.0% in 2QFY2026, marking the ninth consecutive quarter of negative reversion. Unfortunately, positive rental reversions from Singapore and Japan have also eased to 3.9% and 0.0% respectively, adds Koh.
UOB’s picks
Overall, safe-haven inflows are keeping Singapore’s domestic interest rates depressed.
The US Federal Reserve cut the Federal Funds Rate by another 25 bps to 3.75% on Oct 29. “S-REITs benefit as the cost of debt has peaked and would gradually decline,” adds Koh.
The cost of new borrowings has dropped. MPACT issued $200 million seven-year fixed-rate green notes due August 2032 at a low coupon rate of 2.45%. CICT issued $300 million sevenyear fixed-rate green notes due September 2032 at a low coupon rate of 2.25%.
Koh says he observed “significant reduction” in average cost of debt for CDLHT (–1.0 ppt y-o-y), Digital Core REIT (–0.4 ppt y-o-y), Far East Hospitality Trust (FEHT) (–0.9 ppt y-o-y), Keppel DC REIT (–0.4 ppt y-o-y), Lendlease Global Commercial REIT (LREIT) (–0.7 ppt y-o-y) and Suntec REIT (–0.4 ppt y-o-y).
Koh recommends investors buy “laggard S-REITs”. “S-REITs have largely lagged recovery in the broader market despite support from lower domestic interest rates.
Thus, they are likely to catch up with the broader market gradually but are unlikely to lead the decline during a correction.”
For now, he is staying “overweight” on “blue-chip S-REITs” such as CLAR ($4.02 target), CLAS ($1.56), Keppel DC REIT ($2.65), Keppel REIT ($1.20) and LREIT (81 cents).
REIT-vamping portfolios
S-REITs’ portfolio rejuvenation efforts will gain momentum, with property acquisitions, divestments and AEI increasing as borrowing costs moderate, says Fitch Ratings. “We do not expect issuers to deleverage significantly over the next 12 to 18 months.”
MINT and FLCT have higher headroom than their peers and are well-placed to deploy capital for portfolio rejuvenation and growth, write analysts Elise Nguyen, Zhang Weimin and Girish Madan in a Nov 26 note.
On the other hand, Fitch Ratings expects MLT to be more selective in its growth ambitions amid high leverage and tight rating headroom, as challenges in its China logistics segment (17% of revenue) weigh on its profile.
Similarly, they expect ESR REIT to divest $250 million to $350 million of identified noncore assets with limited growth prospects over the next two years to fund its growth plans and improve portfolio quality.
CLINT has the least rating headroom among S-REITs due to a large pipeline of asset developments and acquisitions via forward purchases in India’s business parks and data centres, weighing on leverage.
