S-REITs navigate a challenging 2024 with mixed returns
REIT watch 6 Jan
After a challenging year for the Singapore real estate investment trusts (S-REITs) sector, S-REITs ended 2024 in the red, with the iEdge S-REIT Index generating a total return of -6.1% inclusive of distributions. The S-REIT sector is now trading at a price-to-book ratio of 0.84 times, which represents a discount of around 16% as compared to its longer-term average.
In the first half of 2024, S-REITs generated a total return of -11.4%, but managed to recover more than half of their losses in the second half with a 6.0% total return. In September last year, the US Federal Reserve commenced its first rate reduction in four years, with the three rate cuts in 2024 bringing the end of December fed funds rate at 4.25 to 4.50% (previously 5.25 to 5.50%).
The full-year performance of S-REITs is in line with the FTSE EPRA Nareit Asia ex Japan Index’s -5.2% total return. Across major REIT markets in Asia Pacific, Australia REITs generated a 13.4% total return, while Japan REITs and Hong Kong REITs generated -11.3% and -19.7% total returns, respectively.
Specialized S-REITs achieved the highest total returns of 9.7% in 2024, maintaining their position as the top performing sub-industry for the second consecutive year, following their performance in 2023. Healthcare and Retail S-REITs were also among the top-performing sub-industries in 2024, ranking second and third, respectively. On the other hand, underperformers for the year were Industrial, Diversified and Hospitality S-REITs.
The five best performing S-REITs in 2024 in SGD terms were $Frasers HTrust(ACV.SI)$ (+24.3% total returns), $Keppel DC Reit(AJBU.SI)$ (+20.6%), $Cromwell Reit EUR(CWBU.SI)$ (+20.2%), $EliteComREIT GBP(MXNU.SI)$ (+19.0%), and $ManulifeReit USD(BTOU.SI)$ (+15.3%).
In terms of fund flows, institutional investors recorded net outflows of S$1.6 billion while retail investors recorded net inflows of S$1.6 billion. Retail investors continued to net buy S-REITs after accumulating net retail inflows of S$790 million in 2023 and S$1.5 billion in 2022.
2024 also saw S-REITs become more active in their equity fundraising (EFR), raising over S$2.8 billion, and with two S-REITs launching EFR exercises that raised over S$1 billion.
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