Singapore REITs Show Resilience Despite Rate Pressures, Analysts Maintain Overweight Stance October 6, 2026

Brief Overview

The Singapore REITs (S-REITs) sector experienced mixed performance in August, with the index declining 4% and reversing July’s 3% gains. The Federal Reserve’s hawkish stance, delivering a 25-basis point rate hike to 3.75-4% with indications of another hike in 2026, has created headwinds for the sector. Despite these challenges, analysts maintain an overweight recommendation on S-REITs, focusing on names capable of delivering distribution per unit (DPU) growth despite elevated interest rates.

Investment Positives

The investment case for S-REITs remains compelling despite rate pressures, with several structural advantages providing resilience. The sector benefits from well-positioned debt profiles, with approximately 75% of debt on average being fixed rate or hedged, offering protection against interest rate volatility. This high proportion of fixed-rate debt should provide greater resilience against rising rates and interest rate movements.

The direct impact on borrowing costs may be more limited for S-REITs with SGD-denominated debt, well-laddered maturities, and substantial hedged debt exposure. Importantly, 3-month SORA has already fallen significantly to approximately 1.2% from 3.7% in 2023, reducing immediate pressure on borrowing costs.

Sector operating fundamentals remain stable across key segments. Retail S-REITs particularly stand out, supported by healthy tenant sales, near-full occupancy levels, and limited new supply in the pipeline. These factors should underpin mid- to high-single-digit rental reversions in FY26e, providing a solid foundation for income growth.

The overseas retail REIT sub-sector demonstrated relative strength, being the best-performing segment with only a 0.8% decline. Individual success stories include NTT DC REIT, which rose 3.8% following a positive business update showing distribution income 10.6% above IPO projections.

Challenges

The sector faces headwinds from the Federal Reserve’s more hawkish monetary policy stance. Higher-for-longer interest rates could weigh on valuations by putting upward pressure on dividend yields and keeping refinancing costs elevated over an extended period.

Currency exposure presents additional risks, as demonstrated by Daiwa House Logistics Trust’s 17.5% decline amid concerns over Japanese yen weakness against the Singapore dollar and vacancy risk. The overseas commercial REITs sub-sector was the weakest performer, declining 6.2%, highlighting vulnerability in certain segments.

The broader rate environment continues to create valuation pressure across the sector, with the impact of sustained higher rates potentially affecting investor’s appetite for yield-sensitive investments.

Outlook

Analysts expect the sector to navigate the challenging rate environment through selective positioning in quality names. The focus remains on REITs with robust balance sheets, defensive earnings profiles, and high fixed-rate debt proportions. Retail S-REITs are particularly favoured due to their strong operational metrics and rental growth prospects.

Recommendation & Target Price

Phillip Securities Research maintains an overweight recommendation on Singapore REITs. The firm’s top picks include high-yielding REITs with resilient portfolios: Stoneweg Europe Stapled Trust (BUY, target price: €1.89), Elite UK REIT (BUY, target price: £0.41), and United Hampshire US REIT (BUY, target price: US$0.69).

Frequently Asked Questions

Q: How did Singapore REITs perform in August?

A: The S-REITs Index declined 4% in August, reversing the 3% gain recorded in July.

Q: What was the Federal Reserve's latest policy decision?

A: The Fed delivered a 25-basis point rate hike to 3.75-4%, with the Dot Plot indicating another hike in 2026, reflecting a more hawkish stance.

Q: How are S-REITs protected against rising interest rates?

A: S-REITs have approximately 75% of their debt on average in fixed-rate or hedged positions, providing protection against interest rate volatility. Many also have well-laddered maturities and SGD-denominated debt.

Q: Which REIT sub-sector performed best in August?

A: The overseas retail REIT sub-sector was the best performer, declining only 0.8%, while overseas commercial REITs were the weakest, declining 6.2%.

Q: What is the outlook for retail S-REITs?

A: Retail S-REITs are expected to benefit from healthy tenant sales, near-full occupancy, and limited new supply, which should support mid- to high-single-digit rental reversions in FY26e.

Q: Which individual REIT was the best performer?

A: NTT DC REIT was the best performer, rising 3.8% following a positive business update showing distribution income 10.6% above IPO projections.

Q: What are the analysts' top stock picks?

A: The top picks are Stoneweg Europe Stapled Trust (BUY, €1.89), Elite UK REIT (BUY, £0.41), and United Hampshire US REIT (BUY, US$0.69).

Q: How has SORA moved recently?

A: 3-month SORA has fallen significantly to approximately 1.2% from 3.7% in 2023, which may limit the direct impact on borrowing costs for S-REITs.

This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.

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About the author

Darren Chan

Darren has over seven years of experience across both the buy-side and sell-side. During his tenure as a fund manager, he managed multiple funds and mandates, including dividend income, growth, customised, Singapore-focused, and regionally focused strategies. He holds a First-Class Honours degree in Banking and Finance from the University of London.

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