S-Reits set for first DPU recovery in four years: Julius Baer

[SINGAPORE] For the first time in four years, Singapore real estate investment trusts (S-Reits) should see distributions per unit (DPU) grow in 2026, said Julius Baer on Tuesday (Jan 27).

Analyst Jen-Ai Chua predicted: “Expectations of low interest rates, coupled with steady rental growth in Singapore, should swing growth in DPU for the Reits back into positive territory for the first time after four years of decline.”

All four major regional Reit markets – Singapore, Hong Kong, Japan and Australia – last year posted price gains for the first time since the Covid-19 pandemic.

The FTSE EPRA Nareit Developed Asia Index, often regarded as a barometer for the Asian Reit market, posted 29.5 per cent in total returns in 2025, ending three consecutive years of losses.

The past year was also one of “exceptional resilience” for Asian Reits, which delivered stellar double-digit returns in US dollar terms, and outperformed other global Reit markets and fixed income asset classes, Chua noted.

Their absolute prices are still below pre-Covid-19 levels, she pointed out, but added that 2025’s positive price returns were a “turning point for the sector”, particularly for Reits in Hong Kong and Japan. Gains in these two markets also snapped five- and three-year declines, respectively.

However, the 2025 performance was so “exceptional” that repeating it in 2026 would be difficult, she said.

A “steep tumble” in interest rates in Australia, Singapore and Hong Kong, as well the gradual rise in interest rates in Japan, were tailwinds for the sector, supported by healthy fundamentals for “most of these markets”.

Geopolitical trade tensions further improved the performance of defensive names with a domestic focus, added Chua.

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Positive on Singapore, Australia

Despite 2025 being a hard year to follow, there is still positivity in markets where “structural and economic growth drivers remain intact”.

“Australia and Singapore, with their well-regarded governance regimes, stable currencies and steady track record of returns over the past 10 years, are our preferred long-term Reit markets,” said Chua.

Rental growth in Singapore, together with expectations of interest rates remaining low, should boost DPU for S-Reits; in Australia, “strong underlying growth momentum” should mitigate the risks of potential rate hikes.

Some analysts believe that S-Reits could outperform the local banks DBS, OCBC and UOB, as falling interest rates – a bane for the banks – are likely to be a boon for S-Reits.

Singapore’s retail and office sectors were viewed as “better placed” than other sectors and markets, alongside Australia’s residential and retail sectors, as well as Japan’s office sector.

Real estate services company JLL last week named Singapore’s prime office sector as a “top pick” for real estate investors in 2026, in light of tightening vacancies and a shift towards a favourable environment for landlords driving renewed investor conviction.

Chua described Hong Kong Reits’ recovery a “work in progress”, though the Reit Connect initiative – which links the Stock Connect programme between mainland China and Hong Kong – will be a catalyst for “the larger names”.

“The underperformance of data-centre players in 2025 is also a chance to pick up quality names at more reasonable valuations,” she added.