After a turbulent 2024, Singapore-listed real estate investment trusts (S-Reits) are expected to rebound in 2025 as interest rates show signs of easing. Analysts point to a favorable environment for S-Reits, which offer attractive yields and resilient fundamentals.
2024: A Roller-Coaster Ride for S-Reits
S-Reits faced a challenging 2024, with the iEdge S-Reit Index declining 11.3% and delivering a total return of -5.6%, even with reinvested distributions. Hopes of a rally tied to interest rate cuts were dampened by concerns over slower policy shifts under the Trump administration in the United States.
“While operationally, S-Reits outperformed expectations, distribution per unit (DPU) and net asset values were pressured by high interest rates,” noted RHB analyst Vijay Natarajan.
Rental reversions moderated, and frictional vacancies remained persistent in the Singapore market, said Maybank Securities analyst Krishna Guha. Despite these challenges, certain overseas-focused Reits, like Manulife US Reit (MUST) and Cromwell European Reit, managed to outperform.
2025: A Brighter Horizon
With global interest rates expected to decline, analysts foresee a turnaround for S-Reits. Natarajan predicts that interest cost pressures will peak in the first half of 2025, leading to a recovery in DPUs by year-end.
Ritesh Ganeriwal of Syfe believes that central banks, including the US Federal Reserve, are likely to ease rates further, creating a favorable environment for Reits. “S-Reits are poised to benefit, barring an economic slowdown or recession,” he said.
Ganeriwal highlights that S-Reits currently deliver yields of around 6%, more than double the 3% yield of Singapore’s six-month Treasury bills, making them a “compelling” investment choice.
Sector Winners and Trends
Several subsectors stand to gain from the rate cuts:
- Industrial and Data Centres: Data centres remain a rising asset class, driven by growing demand for artificial intelligence and digital infrastructure.
- Retail: Retail Reits are expected to benefit from stable rental growth as global and niche retailers drive demand for space. A low supply pipeline adds to the sector’s appeal.
- Hospitality: As travel rebounds, hospitality Reits are positioned to capitalize on improving market conditions.
Office Reits are also set to recover as employers recall staff to workplaces, a trend that gained momentum in late 2024.
Key Risks and Challenges
While the outlook is positive, analysts caution against potential pitfalls. Rising borrowing costs and unexpected regulatory changes could impact Reits’ performance. Additionally, slower-than-expected interest rate cuts under the Trump administration remain a concern.
Investment Takeaways
For investors seeking income in a lower-interest-rate environment, S-Reits present an attractive opportunity. With yields outperforming traditional fixed-income instruments and diverse subsectors poised for growth, 2025 could mark a resurgence for the S-Reit sector.
“With tailwinds from easing rates, S-Reits are well-positioned to reward investors in the year ahead.”
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