Real estate investment trusts in Singapore (S-REITs) have rebounded strongly in the third quarter-to-date, with the iEdge S-REIT index delivering total returns of 10.3% since end-June, amid ongoing expectations for upcoming US interest rate cuts.
As of Sept 12, all 30 of the index constituents were in the black for the third quarter-to-date (QTD). The iEdge S-Reit index closed at 1,107.83 on Friday, a year-to-date (YTD) high, bringing total returns of 15% for the YTD, with over two-thirds of the constituents logging double-digit total returns.
The positive performance comes as investors keenly await the US Federal Reserve’s monetary policy meeting on Sept 16 to 17, with growing expectations for rate cuts on the back of recent weakness in US jobs data.
According to CME Fed Watch, there is currently a 92.5% probability of a 25-basis point cut, and a 7.5% probability of a 50-basis point cut for the upcoming meeting, as of Sept 12. This compares to a 6.1% probability of no rate cuts, and a 93.9% probability for 25 bps a month earlier.
A rate cut this week would mark the first time the Fed is reducing its benchmark borrowing rate in 2025, after three consecutive cuts in 2024, and could benefit S-REITs by lowering their borrowing costs.
In Singapore, domestic interest rates have already been declining, with the three-month compounded Singapore Overnight Rate Average (SORA) falling from 3.02 on Jan 2 to 1.53 on Sept 12.
Some of the outperformers in the year-to-date include REITs with predominantly Singapore portfolios, such as OUE REIT, CapitaLand Integrated Commercial Trust (CICT), Lendlease Global REIT (LREIT), and Keppel REIT with YTD total returns ranging between 23.5 to 30.2% as of Sept 12.
These counters reported resilient portfolio performance with stable occupancy and positive rental reversions in their latest H1 results.
1. $OUEREIT(TS0U.SI)$
OUE REIT reported a 5.4% improvement in distribution per unit (DPU) during H1 2025, on the back of a sharp decline in finance costs, which fell 17.3% YoY, underpinned by active capital management approach amid a declining interest rate environment. Its Singapore office portfolio also maintained stable occupancy, with positive rental reversion of 9.1% in Q2 2025.
2. $CapLand IntCom T(C38U.SI)$
Similarly, CICT’s DPU also rose 3.5% in H1 2025 amid stable revenue and lower finance costs. Portfolio occupancy across its portfolio was stable at 96.3%, while its retail and office portfolios also both saw positive rental reversions.
3. $KEPPEL REIT(K71U.SI)$
Keppel REIT has also seen its NPI increase by 11.8% year on year, as the Singapore portfolio continues to be an engine of growth and key contributor to overall performance.
Elsewhere, several US office S-REITs, including $Prime US ReitUSD(OXMU.SI)$ and $KepPacOakReitUSD(CMOU.SI)$ also ranked among the outperformers in the YTD.
Retail investors have been net buyers of S-REITs in the YTD, with the sector receiving total net inflow of around S$600 million as of Sept 11. Meanwhile, institutional investors were net sellers of S-REITs, with over S$800 million in net outflows over the same period.
However, several S-REITs bucked the trend and recorded net institutional inflows year to date, including $Suntec Reit(T82U.SI)$ , OUE REIT and CICT. Institutions have also been net buyers of the sector last week, with net inflows of S$5.4 million between Sept 8-11.
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