Hence, OCBC’s three themes for S-REITs in 2026 carry a cautious tone.
DPU recovery
First, OCBC sees an inflection point for S-REITs’ distribution per unit (DPU), but with “divergent outcomes”.
Taking into account S-REITs’ results for the quarter ended Sept 30, 2025, as well as their operational updates and outlook, OCBC lowered on average their DPU forecasts by 0.3% for S-REITs’ current financial year as at November 2025. The analysts also lowered on average their DPU forecasts by a shallower 0.1% for S-REITs’ following financial year.
On average, OCBC expects S-REITs’ DPU to shrink by 0.4% y-o-y for their current financial year as at November 2025, before rebounding to 4.3% y-o-y growth in the next financial year.
This is predicated on the assumption that there will be no global recession in 2026, and OCBC notes that the tailwind from interest cost savings “can be uneven”. “It depends on the extent of hedges put in place and maturity profile, coupled with the currency denomination of the debt.”
See also: Keppel Pacific Oak US REIT obtains US$37 mil loan facility
Buying and selling
Second, S-REITs are busy with capital recycling, with inorganic growth funded by both debt and equity, notes OCBC. “Capital market activities have thawed amid the lowering of benchmark rates by several major central banks.”
Besides acquisitions, REIT managers have also been actively divesting, thus freeing up capital to be redeployed, notes OCBC. “We expect capital recycling activities to gather momentum in 2026, barring any sharp slowdown in global economic conditions and rebound in inflation.”
Fitch Ratings said the same in a report released the same day as OCBC’s note: “S-REITs’ portfolio rejuvenation efforts will gain momentum, with property acquisitions, divestments and asset enhancement initiatives (AEIs) increasing as borrowing costs moderate.”
Credit metrics for the S-REITs under OCBC’s coverage “appear mostly conducive to support continued capital market activities”.
Overall aggregate leverage ratio declined 0.4 percentage points (ppt) q-o-q to 38.9% as at Sept 30, 2025, while the average cost of debt fell 8 basis points (bps) q-o-q to 3.47% after declining 3 bps in the previous quarter.
Encouragingly, several REIT managers lowered their borrowing cost guidance for the coming year, notes OCBC, but this was not broad-based.
For more stories about where money flows, click here for Capital Section
For example, Mapletree Industrial Trust (MINT) expects its cost of debt to increase by 20 bps y-o-y to 3.3%-3.4% in FY2027 ending March 31 that year.
Frasers Logistics and Commercial Trust (FLCT) guided that its average borrowing cost could increase by another 10–20 bps in FY2026 ending Sept 30 that year from 3.2% in the trailing three-month period to Sept 30, 2025. This is due to the refinancing of debt, which is mostly Euro-denominated, that was drawn down at much lower rates in the past.
S-REITs’ proportion of debt that was fixed or hedged declined from 76.5% at June 30, 2025 to 76.1% at Sept 30, 2025. Based on OCBC’s sensitivity analysis, every 100 bps decline in borrowing costs would provide an average uplift of 3.2% to their DPU forecast for the following financial year.
Favour retail in defensive tilt
Finally, OCBC analysts advise investors to “adopt a defensive tilt” in their positions amid macroeconomic uncertainties.
Among S-REITs, OCBC prefers retail above all sub-sectors, followed by logistics and industrial, office and, lastly, hospitality.
Apart from the healthcare sub-sector, which has only two stocks — Parkway Life REIT and First REIT — OCBC considers the retail sub-sector most defensive, supported by healthy occupancy costs and a high proportion of base rents within total gross rental income.
Singapore retail assets performed well in the quarter ended Sept 30, 2025, with OCBC noting rental reversions ranging from 5.6% for OUE REIT’s Mandarin Gallery to 14.1% for Mapletree Pan Asia Commercial Trust’s (MPACT) VivoCity.
CBRE Research reported a 0.5% q-o-q increase in islandwide prime retail rents for 3Q2025 (up 2.6% y-o-y) and sees overall prime retail rents as on track to rise 2.3% in 2025, marking a return to pre-pandemic levels.
That said, retail assets in China and Hong Kong were more mixed. CapitaLand China Trust (CLCT) and MPACT both reported q-o-q upticks in retail occupancy over the quarter, but reversions at MPACT’s Festival Walk property in Hong Kong widened to –10.1% for 1HFY2026 ended Sept 30, 2025.
Meanwhile, industrial S-REITs typically have a longer weighted average lease expiry (WALE) profile, though OCBC notes occupancy pressures over the past few quarters.
CapitaLand Ascendas REIT’s (CLAR) management lifted its FY2025 ended Dec 31, 2025 guidance from “positive mid-single-digit range” to “positive low-double-digit range”. But OCBC analysts say this trend “should not be extrapolated” as rental reversions “are still likely to moderate” in FY2026 amid an uncertain macroeconomic backdrop.
Looking at broader industry trends, Singapore’s JTC price and rental indexes of all industrial space rose 0.6% and 0.5% q-o-q respectively in 3Q2025. Both moderated from the preceding quarter but remained on a healthy uptrend.
Only the business park segment registered a sequential decline in rents (-0.2%). Overall occupancy rate improved 0.3 ppts q-o-q and 0.1 ppt y-o-y to 89.1%, with demand supported by lower supply, which, in turn, was driven by demolitions of older JTC estates, notes OCBC.
In 3Q2025, office rents for the core CBD Grade A market rose 0.8% q-o-q to $12.20 psf per month (pm), while that of the core CBD Grade B market increased 1.1% q-o-q to $8.85 psf pm, according to CBRE.
CBRE expects rental growth in 2025 to come in at 3%, and this could accelerate in 2026 amid tight supply conditions and resilient demand.
In Singapore, CapitaLand Integrated Commercial Trust (CICT), OUE REIT and Suntec REIT recorded positive rental reversions of 6.5%, 9.3% and 8.5% respectively in the quarter ended Sept 30, 2025.
Finally, OCBC views the hospitality sub-sector as the most cyclical, especially for assets not tied to long-term master leases.
Based on data from the Singapore Tourism Board, Singapore welcomed 14.3 million tourists in 10M2025, 2.5% higher y-o-y but still below pre-pandemic figures, at 90% of 10M2019 levels.
OCBC notes a deepening bifurcation between S-REITs with portfolios concentrated in Singapore and those with a more geographically diversified footprint.
In the three months ended Sept 30, 2025, CapitaLand Ascott Trust (CLAS) recorded 3% y-o-y growth in revenue per available room (RevPAR) across its entire portfolio. Its Singapore portfolio, however, saw 2% lower RevPAR y-o-y over the same period.
OCBC warns that a weakening consumer sentiment and exceptional Singapore dollar strength are key downsides for hospitality S-REITs. “[Still,] geographically diversified portfolios are proven to cushion seasonality, while lease structures with built-in (minimum) guaranteed income can provide a certain level of income stability or downside protection.”
OCBC’s top picks
OCBC’s top picks are CLAS, CICT, Keppel DC REIT, Parkway Life REIT and CapitaLand India Trust.
Interestingly, the injection of funds from appointed asset managers under the Equity Market Development Programme (EQDP) could lift the unit price performance of some mid-cap S-REITs, according to OCBC.
Among the analysts’ three “mid-cap ideas”, two are repeats — Parkway Life REIT and CapitaLand India Trust. OCBC’s final EQDP beneficiary pick is OUE REIT.
