Singapore REITs pull back as interest rates rise. Are they a buying opportunity?

What happened?

Singapore REITs have been under pressure in March 2026.

Earlier, we shared that the escalation in the Middle East conflict has led investors to lower their expectations of interest rate cuts, driving up bond yields.

Recently, we have also seen a jump in the 6-month Singapore T-bill yield. 

This has led to a 7% decline in an index of Singapore REITs has declined by 7% so far this month, compared to the 2% pullback in the Straits Times Index (STI) (as of 26 March).

With the fall in the share prices of Singapore REITs, I saw a question in the Beansprout Telegram group asking about my thoughts on Singapore REITs. 

After all, the correction in the share price of Singapore REITs has also led to more attractive valuations, with some REITs offering a dividend yield of 6% and above.

In this article, we take a deeper look at what the rise in interest rates mean for Singapore REITs, what are the fundamentals of different sectors, and if they are worthwhile buying. 

Why are S-REITs falling in March 2026?

#1 - Oil prices surged above US$110/bbl amid structural supply disruption that could last till 2028. 

The closure of Straits of Hormuz has increased concerns about tightening global supply. This is compounded by missile damage to critical LNG infrastructure in Qatar, which could deepen the disruption over a longer period of time. 

As oil prices affect the price of goods and services on a broader scale, the fear of prolonged high oil prices drove up inflation expectation. 

On 23 March 2026, brent crude soared 58% month-to-date to a high of US$114/bbl .  

If oil prices remains elevated for a prolonged period, it will lead to higher inflation. Risk of rising inflation could drive Central Banks to hike interest rates in order to keep their targeted inflation rate.

#2 - Rising U.S. 10-year Treasury bond yield reflects moderation of rate cut expectations

In fact, that was the message from US Federal Reserve at the Fed meeting on 18 March 2026. The US Federal Reserve kept Fed Funds Rate unchanged at 3.5 to 3.75%, as widely expected by investors. 

This follows its stance of maintaining rates unchanged in the January meeting, after cutting interest rates by three times in 2025.

More importantly, Fed Chairman Jerome Powell sent a caution message on inflation expectations. The Fed now expects personal consumption expenditures (PCE) inflation to be 2.7% in 2026, higher than the earlier estimate of 2.4%. 

Core inflation, which excludes food and energy, is also expected to be 2.7%, up from 2.5%. Inflation is now expected to come down more slowly, with projections for it to reach 2.2% in 2027 and return to the Fed’s 2% target by 2028.

The Federal Reserve has signalled a more cautious path for rate cuts in 2026.

The dot plot, which shows the projections of Fed officials, indicates that most officials expect rates in 2026 to be between 3.25% and 3.50%, implying potentially one rate cut this year. While the median has not changed, some officials are now expecting fewer numbers of cuts. Four or five officials went from expecting two rates cuts in 2026 to expecting just one rate cut. 

Similarly, Bank of England held interest rates unchanged at the meeting on 19 March 2026,  compared to the earlier expectation of one rate cut. Policy makers also warned of rising inflation and slowdown in economic growth caused by the oil shock.   

The Fed’s more cautious tone has pushed US government bond yields higher, with the 10-year yield rising above 4% and reaching about 4.34% by 23 March 2026.

When returns on safer investments like government bonds increase, S-REITs tend to look less attractive in comparison.

To stay competitive, REITs would need to offer higher yields, which usually happens when their prices fall.

In Singapore, the 10-year government bond yield has risen by about 33 bps month-to-date to 2.29%, as at 26 March 2026.   

#3 - Funding cost may rise again 

In 2025, S-REITs benefited from the sharp decline in 3-month SORA, the benchmark rate used for much of their borrowing.

As the Fed began cutting rates in late 2024, 3-month SORA fell to around 200 bps in 2025. This helped lower interest expenses, supporting higher distributable income and distributions.

Looking ahead, the outlook may become less favourable if interest rates move higher again. If inflation remains elevated, central banks may keep rates higher for longer or even raise them further.

In such a scenario, S-REITs could face higher refinancing costs over time.

Does the current pullback in REIT prices offer an attractive entry point?

With uncertainty around interest rates, the near-term outlook for S-REITs may be more challenging, and a broad recovery across the sector is less likely. Investors may need to be more selective.

As shown in the chart below, there has been a significant divergence in the year-to-date performance of Singapore REITs. 

In this environment, REITs with stronger assets and more stable demand may hold up better. This includes those focused on Singapore office, logistics, data centres and purpose-built accommodation.

Investors may also want to look for REITs that can maintain or grow their distributions through actions such as improving existing properties, making acquisitions or achieving higher rents. 

Returns are likely to vary depending on the type of assets they own, where they operate, how their debt is structured and how well management executes.

Fundamentals of selective sectors remain resilient as of 4Q25

Based on the key operating metrics as of end-4Q 2025, we believe the fundamentals of selective sectors remain resilient. 

Singapore REITs reported 4Q25 results, extending the trend of higher year-on-year distribution per unit (DPU) led by lower interest costs. 

Capitaland Integrated Commercial Trust issued long-tenor notes at 2.25%, well below its average cost of debt of 3.3% in 3Q2025. The interest savings flow directly into the distribution to unitholders. Capitaland Integrated Commercial Trust reported FY2025 distributable income increased by 14.4% year-on-year  as cost of debt declined to 3.2%, from 3.6% in FY2024. Interest expense fell 8.9% year-on-year to S$314.7 million. 

Keppel DC REIT's average cost of debt fell to 2.8% in 4Q2025, from 2.9% in 3Q25. CapitaLand Ascendas REIT maintained an average debt cost of 3.5% in FY2025, down from 3.7% in FY2024. These developments signalled that the debt market was strongly supportive of REIT refinancing and growth.

As capital market conditions improved significantly, the REITs took the opportunities to implement their acquisition plans in 4Q25. For the full year 2025, total value of acquisitions announced was about S$8.8 billion. Of which, S$3.0 billion were announced in 4Q25 with sizable acquisitions by Keppel DC REIT and Keppel REIT.

Data centre was the standout sector

The data centre sub-sector delivered the strongest results in FY2025, driven by structural demand from AI workloads and cloud computing.

Keppel DC REIT reported FY2025 gross revenue growth of 42.2% year-on-year and NPI growth of 47.2%, supported by acquisitions of Tokyo Data Centre 3 and full ownership of several Singapore data centre assets. 

Full-year DPU rose 9.8% to 10.381 cents despite an enlarged unit base following a S$404.5 million preferential offering. Portfolio rental reversions for the year were approximately 45%, reflecting exceptional pricing power. 

Portfolio occupancy remained healthy at 95.8% with a weighted average lease expiry of 6.7 years, and rental income from hyperscalers increased to 69.3% of total revenue. Management divested non-core assets in Germany and Malaysia as part of its hyperscale-focused repositioning strategy.

Digital Core REIT posted a 72% surge in revenue for FY2025. The REIT maintained near-full occupancy of 97% and assets under management of US$1.8 billion. 

FY2025 DPU held steady at 3.60 US cents. Wholesale data centre pricing in Northern Virginia climbed to approximately US$225 per kilowatt per month, increase by 7% year-on-year. Shifting to an expansion strategy, it plans to double its US$1.8 billion asset base within the next three years. 

Industrial REITs delivered steady but mixed results

Industrial REITs maintained their resilience, particularly their Singapore industrial assets, though leasing activities in China remains subdued.

CapitaLand Ascendas REIT (CLAR), Singapore's largest industrial landlord, reported FY2025 DPU of 15.005 cents, down 1.3% year-on-year, primarily due to an enlarged unit base following a S$500 million equity fundraising. Portfolio occupancy stood at 90.9% as at end-December 2025. 

Rental reversions were strong at 12.0% for FY2025, accelerating to 19.6% in 4Q2025. CLAR acquired S$1.47 billion in new assets across Singapore and the US at NPI yields of 6.1–7.6%, while divesting S$506.5 million at a 9% premium to valuation. 

Mapletree Logistics Trust (MLT) reported less favourable rental reversion at 1.7% in 3QFY26 (3QFY25: 5.4%), excluding China. Potentially reflecting a gradual recovery, negative rental reversion from the Chinese market has moderated to 2.2% (3QFY25: -10.2%). 

Portfolio occupancy improved to 96.4% as at 31 December 2025, from 96.1% as at 30 September 2025, driven by improvements in Singapore, Japan, and South Korea.  In Singapore, Mapletree Joo Koon Logisitcs Hub continued to see strong leasing momentum. 

Mapletree Industrial Trust (MINT) 3Q FY2025/26 DPU declined 7.0% year-on-year as North American lease non-renewals and FX headwinds took effect. 

MINT outlined plans to divest up to S$600 million of North American properties for portfolio rebalancing. For the Singapore portfolio, MINT achieved healthy positive rental reversion of 7.1% in 3QFY26. Portfolio occupancy for Singapore was stable at 93%. 

Together, these results reaffirmed the strong underlying demand that continues to support industrial and data centre assets.

Industrial REITs have delivered some of the most resilient operating data in 4Q25. The JTC All Industrial Rental Index rose 0.5% q/q, matching the pace in 3Q2025 and extending the upcycle to a 21st consecutive quarter of increases.

Singapore-focused REITs benefited from strong domestic conditions 

The Singapore retail and office sub-sectors continued to benefit from resilient domestic consumption, strong mall traffic, and healthy leasing demand in the CBD.

CapitaLand Integrated Commercial Trust (CICT) delivered what may be the most impressive set of results among large-cap S-REITs. FY2025 gross revenue rose 2.1% to S$1,619.2 million, NPI rose 3.1% to S$1.18 billion, and DPU increased 6.4% to 11.58 cents. 

The 2H2025 DPU surged 9.4% year-on-year to 5.96 cents. Growth was driven by the full-year consolidation of ION Orchard, the CapitaSpring step-up acquisition, and stronger existing property performance. Retail tenant sales surged 19.2% year-on-year in 3Q2025, and both retail and office portfolios maintained occupancy above 96–97%. 

CICT took advantage of the debt market to issue long-tenor notes at just 2.25%. The REIT also divested Bukit Panjang Plaza for S$428 million at a 10% premium to valuation and a 165% premium over its original purchase price. Aggregate leverage remained comfortable at 38.6%.

Suntec REIT posted a strong set of full-year results, with gross revenue and NPI both rising approximately 1.7–1.9% year-on-year, while distributable income to unitholders jumped 14.6% to S$207.3 million. The improvement was driven by a stronger Singapore portfolio—with office occupancy at 98.5% and rent reversions of +8.5%—and meaningfully lower financing costs. 

Full-year DPU climbed 12.5% year-on-year. However, the Australian office portfolio continued to weigh on results, and aggregate leverage edged up to 41.5% in 4Q2025.

Keppel REIT delivered an encouraging full year, with NPI rising 6.9% year-on-year, though DPU slipped due to a higher unit base. 

The most significant development was its acquisition of a one-third interest in Marina Bay Financial Centre Tower 3 for S$1.45 billion, which significantly strengthens its CBD office footprint. Singapore CBD office demand remained robust.

Frasers Centrepoint Trust (FCT) reported strong results for its FY2025 (ended September 2025), with NPI rising 9.7% to S$277.9 million, driven by the acquisition of additional interest in Northpoint City South Wing and AEI-driven improvements at Tampines 1. Committed occupancy was 99.5%.

Office properties within Singapore also held up well, with Grade A CBD properties continuing to see healthy leasing demand and modest increase in passing rents. 

CapitaLand Integrated Commercial Trust (CICT) delivered a stable set of results, with FY2025 net property income rising 1.6 per cent year-on-year and occupancy improving to more than 97 per cent. CICT took advantage of the improved debt market to issue a S$300 million in 7-year  at fixed rate of 2.25 per cent, well below its historical cost of debt, underscoring its strong market access. The consolidation of CapitaSpring further strengthened its position in the Grade A CBD.

Keppel REIT delivered one of the more encouraging updates among the office-heavy REITs. Occupancy rose to 96.3 per cent, driven by strong demand for prime CBD space rents. Borrowing costs also improved to 3.41% for FY2025, from 3.45% for 9MFY25. The most significant development was its proposed acquisition of a 75 per cent stake in the Top Ryde City Shopping Centre in Sydney, a suburban retail asset with stable, essential-services anchors. The acquisition is expected to be DPU-accretive and adds income diversification, signalling Keppel REIT’s shift from defensive positioning to selective, growth-oriented capital deployment.

OUE REIT delivered a steady quarter with higher revenue and NPI from its Singapore assets, supported by stronger performance at Mandarin Orchard and its office properties. Financing costs fell meaningfully due to proactive refinancing, improving distributable income despite softer conditions in parts of the hospitality segment. OUE REIT reported 2H25 revenue and NPI increase of 2.9% and 5.2% year-on-year, on a like-for-like basis. Supported by firm office leasing and a recovery in hospitality performance. As at end-December 2025, office committed occupancy remained high at 95.4%, average passing rents increased to S$10.97 psf, and rental reversions stayed robust at 8.8% in 4Q25 (9.1% for FY25), reflecting sustained flight-to-quality demand for prime CBD offices. 2H25 DPU at 1.25 cents, an increase of 10.6% year-on-year. With astute capital management, the REIT successfully lowered its weighted average cost of debt to 3.9% in 4Q25, from 4.1% in 3Q25. 

Overseas-focused S-REITs delivered a mixed set of results 

Currency volatility and divergent market conditions drove wide performance differences among S-REITs with overseas assets.

CapitaLand China Trust (CLCT) faced a challenging year. Gross revenue fell 9.1% year-on-year to RMB 1,670 million, and NPI dropped 9.4%. Full-year DPU declined 14.7% to 4.82 cents, including a S$5.7 million distribution top-up from prior divestment gains. 

Excluding this top-up, underlying DPU was down approximately 20.5%. The decline was attributed to the divestment of CapitaMall Yuhuating, asset enhancement initiatives downtime, and weaker occupancy and rents. On the positive side, CLCT increased its RMB-denominated debt from 35% to 60%, reducing interest costs by 8.1% and improving its natural currency hedge.

First REIT saw its FY2025 DPU fall around 8% year-on-tear, largely due to the continued depreciation of the IDR and JPY against the SGD. Core healthcare assets continued to perform in local currency terms, but FX translation losses and a larger unit base more than offset the gains.

Elite UK REIT stood out among overseas-focused S-REITs, growing FY2025 DPU by 5.6% year-on-year to 3.03 pence. Revenue rose 1.3% to GBP 38.0 million. The REIT significantly derisked its rental profile by extending leases with its primary tenant, the UK Department of Work and Pensions, resulting in portfolio WALE improving sharply to 7.2 years. Analysts noted that improved cashflow visibility could support tighter credit margins from lenders and potential valuation uplift. The repositioning of Lindsay House in Dundee into a 170-bed purpose-built student accommodation is targeted for the 2027 academic year, offering strategic upside.

Increase in acquisition and divestment activities in 4Q25 

On the acquisition front, CLAR led with S$1.47 billion in new assets. Keppel DC REIT followed with approximately S$1.1 billion of data centre acquisitions. 

Keppel REIT's S$1.45 billion acquisition of a stake in MBFC Tower 3 was the largest single commercial deal of the quarter. CICT completed the consolidation of CapitaSpring to strengthen its Grade A CBD positioning. 

Lendlease REIT also moved decisively to consolidate full ownership of PLQ Mall, acquiring the remaining 30% stake for S$100.8 million at a 2.2% discount to independent valuation, implying an NPI yield of approximately 4.5%. 

Divestments were equally prominent. CLAR divested S$506.5 million of assets at premiums. CICT sold Bukit Panjang Plaza for S$428 million. CapitaLand India Trust sold CyberVale and CyberPearl at a premium to valuation, freeing capital for higher-yielding projects. 

MIT outlined plans to divest up to S$600 million of North American data-centre properties. Keppel DC REIT divested its Kelsterbach Data Centre in Germany as part of its hyperscale-focused repositioning.

These moves underscore a continued emphasis on capital recycling, with managers increasingly willing to exit non-core or mature assets and redeploy proceeds into higher-conviction segments.

What would Beansprout do?

The recent rise in Singapore government bond and T-bill yields has started to weigh on S-REITs. When safer investments like T-bills offer higher returns, REITs become less attractive in comparison, which has led to a pullback in their prices.

This suggests that the near-term outlook may be more challenging, and investors may need to be more selective rather than expecting a broad recovery across the sector.

In this environment, REITs with stronger underlying assets may hold up better. These include those focused on Singapore office, logistics, data centres and purpose-built accommodation, where demand has been relatively more stable. REITs with overseas assets that actively manage currency risks may also be better positioned.

At the same time, many REITs have taken steps in recent years to manage their debt, such as locking in borrowing costs earlier and spreading out their loan repayments. This provides some support, but it may not fully offset the pressure from higher interest rates if they persist.

Valuations have also become more reasonable. The iEdge S-REIT index is trading at P/B 0.88x, lower than the 10-year historical average of 0.97x.  Forward distribution yield has risen to 6.2%, in line with historical average.

In the current environment, investors may want to focus on REITs that can sustain and grow distributions through active portfolio management, such as asset enhancements, acquisitions and rental growth. Performance is likely to diverge based on sub-sector exposure, geographic mix, debt structure and execution capability.

For example, large-cap REITs like CapitaLand Integrated Commercial Trust stands out for their strong Singapore portfolio and acquisition track record, while Keppel DC REIT is positioned to benefit from structural demand in data centres. 

Among mid-cap names, CapitaLand India Trust and Digital Core REIT offer exposure to growth markets, while AIMS APAC REIT and Parkway Life REIT have shown relatively resilient distribution growth.

Overall, Singapore REITs can still play a role in an income-focused portfolio, in our view. However, returns may be less consistent in the current environment, and investors may need to be more selective.

Which REIT is on your watchlist with the pullback in share prices? Share with us in the comments below or join the discussion in Beansprout telegram group.

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To screen for Singapore REITs with lowest price-to-book valuation or highest dividend yield, check out our best Singapore REIT screener. 

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If you prefer diversification without picking individual REITs, you can also gain exposure through Singapore REIT ETFs.

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