OUE REIT, which offers a still attractive distribution per unit (DPU) yield of around 5.7% (as of Sept 1 after outperforming the market ytd), is one of a handful of REITs with only Singapore properties, which could get it revalued higher as Singapore assets, including the Singapore dollar, are increasingly viewed as safe havens during a period of geopolitical tension.
The REIT sharpened its focus in December 2024 with the divestment of Lippo Plaza in Shanghai, China. Han Khim Siew, CEO of OUE REIT’s manager, says: “We hold very prime core assets, which gives us the ability to preserve capital, retain value for our unitholders. The sale of Lippo Plaza is an example of how such assets give us the flexibility to realign our portfolio when necessary.”
With the exit from Lippo Plaza, OUE REIT is one of a handful of S-REITs with an all-Singapore portfolio. It comprises three Grade A office properties, OUE Bayfront, One Raffles Place and the office components of OUE Downtown, all located within Singapore’s central business district (CBD).
OUE REIT also owns two hotels, Hilton Singapore Orchard and Crowne Plaza Changi Airport, that are located along the prime Orchard Road belt and within the Changi Airport vicinity, offering a total of 1,655 upper upscale hotel rooms. The Mandarin Gallery, which sits below Hilton Singapore Orchard, also belongs to OUE REIT.
Since the start of the year and, in particular, since April, following the Trump administration’s so-called Liberation Day, global markets have grown increasingly volatile. Investors have become more risk-averse, prompting an increased reallocation of capital towards Singapore, drawn by its steady currency, political stability and robust legal and financial frameworks.
“As global uncertainties persist, Singapore’s reputation as a safe and stable market status continues to attract global capital and businesses, and this directly benefits our portfolio,” says Han. “Our prime offices enjoy resilient occupier demand, and with steady tourism recovery and a rising middle class in Asean, driving further growth in our hotels and retail assets.”
On the day that The Edge Singapore caught up with Han, the area outside the Mandarin Gallery was a hive of activity with a queue building up at a Labubu PopMart pop-up on the pavement outside the property’s main entrance. Queues of Singaporeans and visitors lined up patiently to purchase Labubu dolls.
Catch the consumer pulse
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Despite Singapore’s hub status, which attracts a constant stream of visitors to the island, luxury in Asia has taken a back seat, with tourists, especially those from China, holding back on luxury purchases.
“Luxury has been redefined. It’s not ostentatious luxury anymore. Quiet luxury has taken over. Preferences have changed. If you look at Chinese spending, they used to spend a lot on fashion and luxury. That trend actually has moderated significantly and has shifted mostly into F&B and experiences,” Han points out.
Apart from the different spending patterns, retail tenants have often highlighted other operating challenges, such as labour shortage.
“Labour has become one of the main concerns. Some of our tenants shared that they can’t find locals who want to work for them. Securing a foreign worker quota is challenging for small retailers that lack the scale to meet local hiring requirements,” Han acknowledges.
Despite the challenges, Mandarin Gallery’s 34.4% y-o-y rent reversion in 2Q2025 shows retail thrives on strong tenant-landlord partnership. Committed occupancy for Mandarin Gallery as of 2Q2025 is 99.0%, higher than pre-Covid levels in 2019, a result of a curated mall with active asset management. For instance, Han and his team are taking advantage of trends, such as the popularity of Korean cuisine. Even in mid-afternoon, the unusual Korean dining experiences such as Modu, Singapore’s first samgyetang speciality restaurant, at Mandarin Gallery had queues.
Han describes: “It is important for the landlord to evolve in line with trends, current trends and future trends. As a landlord, we have several responsibilities. One is to provide a wonderful place for retailers to trade. This includes curating the right tenant mix and minimising cannibalisation from having the same trade mix or offering identical products. We’re not a large format mall, but we attract many retailers who want to enter the Singapore market and establish their flagship stores at Mandarin Gallery.”
For example, luxury luggage brand Rimowa has only two stores in Singapore, and Mandarin Gallery is one of them,” Han says.
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Tourism recovery
Singapore Tourism Board, along with property owners on Orchard Road, are in discussions to revive Singapore’s most famous shopping district. “There are two parts to Orchard Road retail. You have locals coming in for a specific product or service. Outside of that, it’s mostly driven by tourists,” Han says.
Tourist arrivals recovered steadily after the global pandemic lockdown and Singapore’s own Circuit Breaker. Visitor arrivals in 2023 surged to 13.6 million from just 6.3 million in 2022 and continued to rise in 2024 to 16 million.
“The forecast for this year is it will be close to 17.0 million to 18.5 million, but we are still trading below that in terms of visitor arrivals of 19 million in 2019. There is a direct correlation between Orchard Road’s performance and visitor arrivals,” Han observes.
Singapore, being an open economy and a financial and transportation hub, is inevitably affected by geopolitics, the shape of which has caused the Singapore dollar to be a haven currency, to the detriment of tourism, as well as corporate travel.
Tourism-dependent hotels account for 33% of OUE REIT’s revenue. In June 2025, 53% of the REIT’s hotel guests were from North and Southeast Asia.
OUE REIT is protected from the volatility of the hospitality sector through rental agreements signed with its sponsor, OUE, that protect the downside but provide the REIT with upside. Hilton Singapore Orchard and Crowne Plaza Changi Airport operate under master lease rent structures that comprise variable components tied to hotel performance, with minimum rent guarantees of $45 million and $22.5 million per annum, respectively.
“Regional countries have gotten cheaper relative to Singapore. The Singapore dollar has appreciated a lot against our neighbouring countries. Singapore is becoming expensive for tourists,” Han says. That affects room rates and retail spending.
Nonetheless, structural tailwinds across the region are expected to further support long-term demand for tourism and retail in Singapore. The combined population of China, India and Southeast Asia is projected to reach 3.7 billion by 2030. Within Southeast Asia, the middle class is expected to make up 65% of the population by then, driven by rising incomes and urbanisation. As more consumers across the region gain spending power, demand for quality travel, hospitality and retail experiences will grow, and OUE REIT is well-positioned to benefit from this attractive growth potential.
Is the office sector more resilient?
Is office space more resilient? The answer is that office income appears steadier, with occupancy and capital values more stable than other asset classes.
From a net lettable area and rental income perspective, OUE REIT’s portfolio is balanced between stability and growth. Office accounts for 52.0% of its revenue, followed by hospitality with 31.1% and retail with the remaining 16.9%. OUE REIT’s office portfolio accounts for more than half of its total valuation.
Singapore’s CBD has a limited supply of office space. According to CBRE, the office supply in the CBD will be limited beyond 2027. There are no new Government Land Sales (GLS) sites with a significant office component in the CBD under the 2H2024 and 1H2025 GLS Programme, CBRE says.
Island-wide, projected supply is substantially lower than the five-year historical average annual supply (2020–2024). From 2025 to 2027, the projected island-wide office supply is 1.7 million sq ft. The average annual office supply from 2025 to 2027 is approximately 0.6 million sq ft, lower than the five-year historical average annual supply (2020–2024) of 1.1 million sq ft.
The supply-demand outlook is favourable to OUE REIT. As Han tells it, “the office component anchors the REIT and provides income resilience. What we’re offering the investor is access to prime, core assets.”
Han has anecdotes from 2022 when the global office was out of fashion as an investment. When the management team went to see the Thai investors back in 2023, “they found it hard to believe that Singapore’s office occupancy and rents remained high and didn’t show keen interest in investing in offices. Similarly, in Korea, we were told no office REITs exposure. Now all these Thai investors want to talk to us. In Korea, too, they think the Singapore office sector is a great sector to invest in,” Han recounts.
In 2Q2025, OUE REIT’s office committed occupancy was 95.5%, above core CBD (Grade A) occupancy of 94.7%. Average passing rent was $10.86 psf per month, up 0.8% q-o-q. Rental reversions were 9.1% in 2Q, following 12 consecutive quarters of positive rent reversion.
“Even through that period when investors questioned the sustainability of continued office rental growth, we were able to grow. We had consistent rental reversion at every single one of our office buildings in Singapore,” he adds.
Robust capital management
Han was appointed CEO of OUE REIT Management in February 2022. One of the first things he worked on was getting an investment-grade credit rating by October 2023, which helped lower the cost of debt.
In September last year, OUE REIT’s seven-year green notes were priced at 3.9% compared with the REIT’s May 2022 5-year bond, which cost 4.2%. Subsequently, OUE REIT followed up with a re-tap at a tighter reoffer yield of 3.78% in November, the lowest achieved by OUE REIT for a bond issuance.
“Getting the investment-grade credit rating helped to strengthen the base of the REIT,” Han says. “In 1H2025, we saw finance costs decline 17.3% YoY in 1H 2025, thanks to our effective capital management approach. Being 100% Singapore-dollar funded has also worked to our advantage, allowing us to benefit from the significant decline in SORA while avoiding the currency volatility and higher interest rates seen in other markets.”
The advantage of OUE REIT as an investment is that its entire portfolio is in Singapore, at a time when Singapore assets are proving attractive to global and regional investors because of their stable capital values and income.
“We’ve de-risked the portfolio; you have Singapore as a safe haven; the Singapore dollar remains strong; supply, demand dynamics for office are positive; and we believe in the long-term secular trend of hospitality and tourism,” Han concludes.
