REIT Watch - S-REITs set for best year since 2019 with 14.7% total returns in 2025 YTD

Top iEdge S-REIT performers in 2025 YTDNameStock CodeMarket Cap S$BTotal Returns (%)Dividend Yield (%) PB Ratio OUE REITTS0U1.932.16.00.6Acrophyte Hospitality Trust (USD)XZLUS$0.131.85.10.4Keppel REITK71U4.229.36.80.8CapitaLand Integrated Commercial Trust C38U17.526.64.41.1Mapletree Pan Asia Commercial TrustN2IU7.625.75.50.8Source: Bloomberg, SGX Stock Screener Real estate investment trusts in Singapore (S-REITs) are set to deliver their best yearly performance since 2019, as prices rebound amid stable operating performance and a more supportive interest rate environment.As of Dec 5, 2025, the iEdge S-REIT index has risen 9.3 per cent for the year-to-date, with dividend distributions taking total returns up to 14.7 per cent. This marks the strongest yearly performance since 2019, when the index rose 19.6 per cent, with total returns of 27.5 per cent.Of the 33 constituents in the iEdge S-REIT index, 29 have delivered positive total returns for the 2025 YTD, with the top 10 performers delivering over 20 per cent total returns. Outperformers include diversified S-REITs such as CapitaLand Integrated Commercial Trust, OUE REIT, Mapletree Pan Asia Commercial Trust (MPACT) and Suntec REIT. S-REITs have mostly delivered stable operating performances in the latest Q3 financial results, with counters across various sub-segments such as Retail, Industrial and Office showing stable occupancy and positive rental reversions.UOB Kay Hian analyst Jonathan Koh said in a Nov 27 report that most of the S-REITs under their coverage delivered Q3 results that met or exceeded expectations. The sector has also benefitted from improvements in the interest rate environment.As of Dec 5, the US Federal Reserve has cut interest rates twice this year, with 25 basis points cuts in September and October, building on the three rate cuts that took place in 2024. Expectations are currently for another rate cut to take place in December, with CME Fed Watch showing a 87 per cent probability of a 25-basis point cut at the Dec 10 Fed meeting.In Singapore, borrowing costs have already decreased in 2025, with 3-month compounded SORA falling from 3.02 on Jan 2 to 1.25 on Dec 4. S-REITs have also reported lower costs of debt in their latest results. For example, MPACT’s finance expenses improved 16.4 per cent year-on-year during the second quarter from favourable interest rate conditions and proactive debt reduction. Similarly, OUE REIT reported a 19.7 per cent decline in finance costs to S$21.6 million during the third quarter amid a declining interest rate environment and active capital management. Beansprout research analyst Gerald Wong said in a report last month that the 3Q 25 results continued to demonstrate how falling interest rates visibly improved S-REITs performance. “A number of S-REITs reported lower average debt costs and showed how a 25 or 50 bps decline in rates could translate into higher distributable income,” he said. “The ability to issue long-dated debt at tighter spreads signalled that capital market conditions have improved, supporting stronger earnings sustainability heading into 2026.”Wong also noted that S-REITs have been more active in acquisitions and divestments in recent months.“Within the sector, we favour REITs that can sustain and grow distributions through active portfolio management, such as asset enhancements, selective acquisitions, or rental reversion opportunities,” he said, adding that their picks within the mid-cap REITs include Elite UK REIT, CapitaLand India Trust and Digital Core REIT.Meanwhile, Fitch Ratings said in a commentary last month that it expects rated S-REITs portfolio rejuvenation efforts to gain momentum as borrowing costs moderate. It noted that spending on AEI was around S$350 million in H1 2025, and it expects capex to rise by 20 to 25 per cent in 2025 as trusts invest in raising asset quality.“We expect capitalisation rates to compress amid rising demand, especially for prime logistics, retail and office assets in core markets, driving valuations higher,” the analysts said, adding that they expect REITs’ borrowing costs to fall further, in line with expected reduction in US policy rates in 2026.While S-REITs unit prices have rebounded in 2025, some analysts note that the performance has lagged the broader Singapore market, with indices such as the Straits Times Index (STI) delivering total returns of over 25 per cent during the same period. UOB Kay Hian’s Koh said: “S-REITs have largely lagged recovery in the broader market despite support from lower domestic interest rates. Thus, they are likely to gradually catch up with the broader market but are unlikely to lead the decline during a correction.”He maintains an overweight for the sector, noting that S-Reits have stable cash flows due to long tenure of leases, providing income stability despite the uncertain macro environment. For more research and information on Singapore’s REIT sector, visit sgx.com/research-education/sectors for the SREITs & Property Trusts Chartbook.REIT Watch is a regular column on The Business Times, read the original version.Enjoying this read?Subscribe now to our SGX My Gateway newsletter for a compilation of latest market news, sector performances, new product release updates, and research reports on SGX-listed companies.Stay up-to-date with our SGX Invest Telegram channel.