S-Reits’ turn to shine in Q4 as lower interest rates fuel returns
Analysts are particularly bullish on the office sector
[SINGAPORE] Some market watchers believe Singapore-listed real estate investment trusts (S-Reits) could have a strong run, potentially outshining the trio of local banks as they turn in their report cards for the fourth quarter ended December 2025.
Falling interest rates are expected to put pressure on income of banking giants DBS , OCBC and UOB , which together account for more than half of the combined market capitalisation of companies on the Straits Times Index (STI).
But lower rates spell good news for the S-Reits, where elevated cost of debt in the past few years has eroded distributions.
“Lower rates and continued US easing are tailwinds for the sector,” said Macquarie Equity Research analysts Jayden Vantarakis and Rachel Tan. “We prefer S-Reits over banks on the tailwind of lower rates.”
The upcoming Q4 results reporting season for the S-Reits will cap off what has been a good year for the sector.
Morningstar equity analyst Xavier Lee noted that 2025 marked the strongest performance for S-Reits since 2019.
With distributions reinvested, S-Reits generated a total return of 16.4 per cent last year – a worthy performance against the backdrop of higher-for-longer interest rates, albeit lower than the STI’s 28.8 per cent total return and the banks’ average of 21.8 per cent.
“Strong 2025 returns have left many Reits fairly valued; however, select opportunities remain for discerning investors,” Lee said.
Back to office
In particular, analysts will be paying attention to key metrics such as rental and occupancy rates in the office sub-sector.
“Looking ahead, we believe the market expects robust Singapore office market performance, supported by limited office supply,” Lee said.
DBS Group Research analysts Derek Tan, Dale Lai, Geraldine Wong and Tabitha Foo said that Grade-A offices have “the strongest upside potential due to a multi-year supply drought and strengthening pricing power”.
“Amid a moderating global economy, Singapore real estate remains a defensive store of value due to landlord-friendly fundamentals and supply scarcity,” they added.
Maybank Research analysts Krishna Guha and Liu Miaomiao believe that cyclical drivers are aligning for the office sub-sector.
“At the start of 2025, we expected spot rents to fall, but they instead rose 2.1 per cent year on year in Q3 2025. Further, this is accompanied by rising occupancy for CBD (Central Business District) offices through the year, though Grade-B assets continued to see elevated vacancies,” they said. “We expect Q4 to sustain the gains.”
Macquarie’s Vantarakis and Tan expect Singapore assets to remain relatively stable across all asset classes.
“We think reversions will remain positive, though at a more moderate level, as expiring rents start to increase,” they said. “While demand is more moderate, the lack of supply should continue to support current rents.”
On the industrial front, however, rental growth may see a further slowdown on continued uncertainty in the manufacturing and trade-related sectors due to tariff headwinds.
“Despite a challenging logistics and industrial sector, we expect supply to moderate in 2026, and we expect rents to stabilise,” the Macquarie analysts said.
The way the DBS analysts see it, the logistics and data-centre segments within the industrial sub-sector could offer the “brightest prospects”.
“These sectors retain the ability to still see rent growth with potential for upside surprises due to a restrictive supply environment,” they said.
Potential acquisitions
Apart from the Q4 results, market watchers will also be keeping a keen eye on managers’ guidance and announcements regarding acquisitions.
The DBS analysts noted that S-Reits are entering a “virtuous cycle of accretive acquisitions”, with lower interest rates reviving capital market activity.
“Lower interest rates – especially Sora (Singapore Overnight Rate Average) rates – and the strength seen in S-Reit prices have significantly improved transaction economics, enabling acquisitions to clear hurdle rates that were previously unattainable,” they said.
“As funding costs retrace from the 2023 peak, the spread between cap rates and financing costs has widened, restoring accretion for core sectors such as logistics, data centres and suburban retail,” they added.
“This shift alone has transformed several marginal transactions into earnings-accretive opportunities.”
Maybank’s Guha and Liu said the property market is showing “nascent signs” of cap rate compression as buyer interest resurfaces.
The research house remains positive on S-Reits “on the back of rising distribution, supported by lower funding cost, capital recycling and portfolio reconstitution”.
Key results
The S-Reits’ Q4 earnings season kicks off on Thursday (Jan 22) with Suntec Reit announcing its full-year results.
The CapitaLand stable of S-Reits will also announce their full-year results, with CapitaLand Ascott Trust on Jan 29, CapitaLand India Trust on Feb 2, CapitaLand Ascendas Reit and CapitaLand China Trust on Feb 5, and CapitaLand Integrated Commercial Trust on Feb 6.
The Keppel family of Reits and business trusts will also unveil their full-year results, with Keppel DC Reit on Jan 30, Keppel Pacific Oak US Reit and Keppel Infrastructure Trust on Feb 3, and Keppel Reit on Feb 4.
Other S-Reits scheduled to announce their full-year results include OUE Reit on Jan 26, CDL Hospitality Trusts on Jan 30, Parkway Life Reit on Feb 2, ESR Reit and Digital Core Reit on Feb 4, Elite UK Reit on Feb 9, Prime US Reit on Feb 11, and United Hampshire Reit on Feb 20.
