After nearly a decade of stagnant distributions, two structural tailwinds are converging, says Ng. Falling borrowing costs — with the three-month Singapore overnight rate average (Sora) down from around 4% to 1% — are directly reducing the sector’s largest expense, while sustained positive rental reversions across office, retail, industrial and data centre assets are lifting top-line revenues.
Together, these factors should bring S-REITs’ median distribution per unit (DPU) growth to an inflexion point, he adds, from “broadly flat” to around 2% per annum over 2026 to 2028.
Ng sees a “key re-rating catalyst” for the sector. Historically, Singapore REIT valuations have been closely correlated with the direction of dividend growth — periods of DPU expansion have consistently coincided with tighter dividend yields and stronger total returns. At the same time, flat or declining distributions have weighed on multiples.
With the sector now entering a DPU growth cycle for the first time in nearly a decade, Ng expects the market to re-price accordingly — as earnings estimates are revised upward and dividend growth becomes more visible, investors should be willing to accept lower yields, driving capital appreciation on top of the income return.
See also: Jefferies expects S-REITs to enter DPU growth cycle
Cheaper borrowing costs
With three-month Sora at around 1% today, S-REITs are refinancing maturing Singapore dollar-denominated debt at 2% to 3% instead of 4% to 5%, notes Ng.
See also: Singapore REITs: Governance by design, or governance by hope?
As hedged debt rolls over at these lower rates, Ng expects the savings to translate directly into higher DPU. Lower funding costs also enable more dividend-accretive property acquisitions, he adds.
Borrowing costs are a major expense for S-REITs. Comprising around 30% of income or dividends, borrowing costs are typically the largest expense, notes Ng. With a borrowing interest rate of around 3%, every 10-basis-point (bp) improvement could add about 100 bps to DPU growth for REITs, he adds.
To smoothen income and better match the long duration of their assets, S-REITs hedge an average of 75% of their interest rate exposure through a combination of fixed-rate debt and interest rate derivatives, and manage a portfolio debt maturity of around three years.
“Substantial cost savings can be realised as these instruments mature, in particular for Singapore-dollar-denominated ones,” says Ng.
Sustained positive rental reversions
Major asset classes — office, retail, industrial and data centres — are indicating sustained positive rental reversions, notes Ng. “Across our coverage universe, management guidance broadly continues to point towards sustained positive reversions in Singapore assets and narrowing negative reversions in weaker overseas portfolios.”
Ng expects Singapore rental markets to remain “broadly supportive” across most major sectors over the medium term. “A positive rental outlook, coupled with a strengthening Singapore currency, ought to keep cap rates tight and asset valuations growing, supporting rising net asset values (NAVs) for REITs.”
With prime office space in short supply here, rental growth could accelerate from 3% in 2025 to 5% in 2026, says Ng. As it is, vacancy has already fallen to a record low of 3% in the Core Central Business District Grade-A submarket in 1Q2026.
“A below-trend pipeline of new completions, and the potential for more existing stock to be taken out for redevelopment as part of policymakers’ push for urban renewal, suggests vacancies remain tight,” he adds. “Notwithstanding the uncertain global macro backdrop and risk of workplace disruption from AI, leasing conditions remain relatively healthy. We see incremental demand coming from the banking and finance sector, as well as AI companies expanding from co-working to traditional office space.”
Office S-REITs broadly expect to achieve around 5% in rent reversions this year.
Retail rents, meanwhile, are “stable and growing”, says Ng. “Rents [will] likely sustain 1% to 2% growth rates in 2026, amid low vacancies and retail leasing conditions. Shopper footfall and tenant sales continue to grow at 2% to 4% y-o-y in early 2026.”
Ng sees the downtown submarket supported by resilient tourism growth, with the Singapore Tourism Board (STB) targeting up to 7% growth in visitor arrivals this year, more than triple the 2% growth recorded in 2025.
In the suburbs, demand for non-discretionary goods and services is likely to receive a meaningful boost from vouchers and rebates announced during Budget 2026, writes Ng, adding as much as “thousands of dollars” to household disposable incomes.
Despite some industry fears, Ng sees “limited cannibalisation risk” from the upcoming commencement of the Johor Bahru-Singapore Rapid Transit System (RTS) Link in January 2027, “given the diminishing currency differential”.
S-REITs broadly expect to achieve around 5% to 10% in retail rent reversions this year.
On the other hand, industrial and logistics properties could see “muted growth” in rents this year, weighed down by disruptions linked to the Middle East conflict, says Ng.
Singapore’s manufacturing output will likely moderate from the 8% y-o-y growth recorded in 1Q2026, as growth slows for clusters outside of semiconductors and AI-related components, says Ng. On the supply side, new prime logistics stock coming online in 2026 is lower and mostly pre-committed, but demand remains robust, supporting the case for mild rental growth.
“However, for older industrial buildings, especially for business parks, challenging demand conditions suggest these could be better off redeveloped to unlock higher rents and more leasable space,” he adds.
S-REITs here broadly expect to achieve around 5% in rental reversions this year.
Finally, data centres are expected to see “high growth” in rental reversions this year — likely sustaining double-digit figures, says Ng. “Utilisation is already running at around 95%, and planned incremental new supply additions are well below other markets in the region. From a current installed capacity of 1.4 gigawatts (GW), another 0.2GW are due to be added.”
Given sustained occupier demand, tight power availability and development constraints, S-REITs broadly expect to achieve rental reversions above 10% this year, notes Ng.
10 S-REIT picks
Ng’s picks together account for more than 70% of the $100 billion S-REIT sector by market capitalisation.
Following CLAR with “buy” calls are Mapletree Logistics Trust (MLT), CapitaLand Integrated Commercial Trust (CICT), Frasers Centrepoint Trust (FCT) and Keppel DC REIT (KDCREIT).
Ng favours CICT for its “unmatched Singapore scale” and accelerating DPU profile, KDCREIT for “scarcity-driven Singapore data centre premiums” and 5% DPU CAGR, MLT for moving past its “DPU trough” and valuation pricing in excessive pessimism on China, and FCT for its “defensive suburban retail cashflows, now layered with growth upside”.
Meanwhile, Ng’s five “hold” calls among his top picks are Suntec REIT (SUN), Mapletree Pan Asia Commercial Trust (MPACT), Keppel REIT (KREIT), Mapletree Industrial Trust (MIT) and Frasers Logistics & Commercial Trust (FLCT).
Each of these five names faces a “specific headwind”, says Ng. KREIT faces “dilution” from its recent preferential offering to acquire Hongkong Land’s one-third stake in Marina Bay Financial Centre (MBFC) Tower 3, MIT faces “ongoing US data centre obsolescence”, MPACT faces overseas portfolio drags, FLT has posted “continued multi-year DPU decline”, and SUN’s strategic review optionality has “already [been] partially priced in”, he adds. “These reasons, we believe, prevent a more positive rating at current entry points.”
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