✨Kenny_Loh's SReits Insights: Why 2026 Could Be a Turning Point?

In his latest market outlook, @Kenny_Loh points out that 2025 is shaping up to be the strongest year for Singapore REITs (S-REITs) since 2019, with the sector benefiting from stabilising interest rates and the early phase of a rate-cut cycle. Looking ahead, he views 2026 as a potential inflection year, where S-REITs transition from recovery to renewed growth.

Kenny Loh is a distinguished MAS Private Wealth Advisor with a specialization in holistic investment planning and estate management. He excels in assisting clients to grow their investment capital and establish passive income streams for retirement. Kenny also facilitates tax-efficient portfolio transfers to beneficiaries, ensuring tax-efficient capital appreciation through risk mitigation approaches and optimized wealth transfer through strategic asset structuring.

1. 2025 Review: A Rate-Driven Recovery

According to Kenny_Loh, S-REITs are on track to deliver around 12–15% total returns in 2025, combining capital appreciation and steady distributions. This marks a sharp rebound from the high-rate pressure faced in 2023–2024.

The key catalyst was the decline in borrowing costs. Singapore’s 3-month compounded SORA fell from a peak near 4.5% to around 1.3% by late 2025, significantly easing refinancing stress. Operational fundamentals remained resilient, with stable occupancy rates and positive rental reversions across Industrial, Retail, and Office sectors.

Despite the rally, Kenny_Loh notes that valuations remain attractive. The sector is still trading at an average P/NAV of about 0.85, with a trailing distribution yield near 5.5%, suggesting further upside as conditions normalise.

2. Interest Rates: A Structural Tailwind Into 2026

Kenny_Loh highlights a clear macro shift from “higher-for-longer” to an easing rate cycle:

US Fed Funds Rate: Further cuts are expected in 1H 2026, potentially reaching a 3.00–3.25% terminal rate by year-end, supporting global liquidity and risk sentiment.
Singapore SORA: Expected to remain low or trend lower, directly reducing debt servicing costs for S-REITs with SGD borrowings.

He emphasises that lower rates represent the most important positive driver for both DPU growth and valuation re-rating in 2026.

3. How Lower Rates Could Lift DPU and Valuations

Kenny_Loh outlines two main transmission channels:

(1). DPU Accretion:

Lower interest expenses immediately improve distributable income, especially for REITs with shorter weighted average debt maturity (WADM) and a lower proportion of fixed-rate debt. Even a 25–50bp reduction in funding costs can lead to a visible uplift in DPU for these names.

(2). Valuation Re-rating:

Falling bond yields narrow yield spreads, prompting investors to rotate from bonds into REITs. At the same time, lower capitalisation rates in the private property market can lift asset valuations, supporting NAV growth and higher P/NAV multiples.

Historically, REITs have often performed well in the 12 months following the start of an easing cycle, reinforcing his constructive view.

4. Key Metrics to Focus on in 2026

With the rate cycle turning, Kenny_Loh suggests investors prioritise financial resilience and income visibility, including:

Gearing Ratio: Lower leverage provides capacity for accretive acquisitions.
Interest Coverage Ratio (ICR): Strong buffers above MAS requirements reduce refinancing risk.
WALE: Longer lease expiries enhance cash flow stability.
P/NAV vs. History: Discounts can offer upside, but should be assessed relative to historical trading ranges.
Distribution Yield Spread: A wider spread versus Singapore 10Y government bonds indicates better relative value.

5. Sector Outlook: Where Strength Is Concentrating

Kenny_Loh sees differentiated performance across sectors:

Industrial (Logistics & Data Centres): The strongest outlook, supported by e-commerce growth, AI adoption, and long-duration leases.
Suburban Retail: Resilient footfall, positive rental reversions, and limited new supply.
Office: Stable but divergent—prime Singapore CBD assets remain resilient, while US office may bottom and re-rate as rates fall.
Hospitality: Benefiting from continued tourism recovery and strong RevPAR growth.
Healthcare: Defensive and stable, underpinned by aging demographics and long-term leases.

6. 2026 Outlook: From Survival to Growth

In conclusion, Kenny_Loh believes 2026 could be a pivotal year for S-REITs, marking a shift from balance-sheet defence to earnings and valuation recovery. As interest expenses fall, DPU growth is expected to inflect upward, strengthening S-REITs’ appeal as an income asset with capital appreciation potential.

He reiterates that investors should focus on quality assets, strong balance sheets, and exposure to structural growth sectors such as data centres, logistics, and suburban retail.

🎄 Wishing everyone a warm and joyful Christmas!

💬 Discussion

Do you see 2026 as the real turning point for S-REITs?
Which S-REIT sectors are you positioning for in a lower-rate environment?

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