SREITs Approaching an Inflexion Point as Inflation Prints Cool
Cooler inflation prints have raised the probability of a September rate cut
Regional REITs have seen gains in July
Furthermore, SREITs outperformed relative to regional REITs as it increased 5.4% m/m in July
The gains were mostly attributable to REITs with riskier capital management due to 2 main developments during the month
Fed Chair Powell putting September rate cuts on the table at the July FOMC meeting
MAS proposal to raise gearing to 50% and establish a single ICR floor of 1.5x for all SREITs
DBS’s observation of 2Q24’s earnings results as it is still ongoing
SG business parks remains soft though SREITs business park occupancies are at >80% (higher than submarket average of ~70%)
Hotel RevPAR softer-than-anticipated as there was short-term supply overhang in Orchard and CBD area (despite attempts to close occupancy gap), room rates fell, and guidance felt more neutral instead of positive
Retail high single digit and office >5% rental reversion was as expected; subsectors are well supported by tight supply
Markets have priced in more rate cuts
Regional REITs Benchmark Performance
Regional interest rate movements (absolute, ppt)
Source: DBS, as of 2024/08/02. For illustration purpose only, past performance is not indicative of future performance.
SRT – Some Key Indicators
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