Singapore REITs Monthly: Cheaper Funding Costs Set to Drive DPU Recovery February 3, 2026
Market Performance Overview
The Singapore REITs (S-REITs) sector demonstrated resilience in Dec 2025, with the S-REITs Index posting a 0.7% gain that reversed the previous month’s 0.8% decline. This positive momentum contributed to impressive annual performance, with price returns reaching 11.3% for 2025. When dividends are included, total returns for the year reached a robust 16.1%.
Individual REIT performance varied significantly during Dec. Stoneweg Europe Stapled Trust emerged as the month’s standout performer, surging 6.5% supported by ongoing share buyback programmes. Conversely, Keppel REIT experienced the steepest decline, falling 7.8% following news of a dilutive acquisition involving an additional one-third interest in MBFC Tower 3.
Sector Analysis and Outlook
From a sub-sector perspective, overseas industrial REITs led the gains with a 2.9% increase, while overseas commercial properties struggled, declining 1.9% primarily due to weakness in MUST. The varying performance across sub-sectors reflects the diverse dynamics within the Singapore REIT market.
Phillip Securities Research maintains an OVERWEIGHT recommendation on S-REITs, highlighting the sector’s attractive valuation metrics. The sector currently trades at a forward dividend yield spread of approximately 3.3% and a price-to-net asset value ratio of 0.99x, which the team views as a compelling entry level given the potential for distribution per unit growth in FY25-26.
Investment Strategy and Key Drivers
The team expects FY25 results to exceed expectations, driven primarily by declining financing costs. REITs with higher exposure to Singapore dollar-denominated floating-rate debt are positioned to benefit most from the significant 183 basis points year-over-year decline in 3-month SORA rates to 1.19% as of 31 Dec, 2025.
The investment strategy will ocus on REITs with strong sponsor backing, robust balance sheets, and improving operational metrics. Within sub-sectors, retail REITs are favoured for their potential to deliver high single-digit positive rental reversions in 2026. High-yielding overseas S-REITs offering yields above 8% with resilient portfolios are also preferred, including Stoneweg Europe Stapled Trust (BUY, target price €1.86), and Elite UK REIT (ACCUMULATE, target price £0.39).
Frequently Asked Questions
Q: What was the overall performance of Singapore REITs in 2025?
A: The S-REITs Index delivered price returns of 11.3% for 2025, with total returns including dividends reaching 16.1%. December saw a 0.7% gain, reversing November’s 0.8% decline.
Q: Which REIT was the best and worst performer in December 2025?
A: Stoneweg Europe Stapled Trust was the top performer, rising 6.5% supported by share buybacks. Keppel REIT was the worst performer, falling 7.8% due to a dilutive acquisition announcement.
Q: What is driving the positive outlook for Singapore REITs?
A: Lower financing costs are the primary driver, with 3M SORA rates declining 183 basis points year-over-year to 1.19%. REITs with SGD-denominated floating-rate debt are expected to benefit most.
Q: What is Phillip Securities Research’s recommendation on Singapore REITs?
A: The firm maintains an OVERWEIGHT recommendation on S-REITs, citing attractive valuation levels and potential for DPU growth in FY25-26 as financing costs continue to ease.
Q: Which sub-sectors and specific REITs are favoured?
A: Retail REITs are preferred for potential high single-digit rental reversions. Specific recommendations include Stoneweg Europe Stapled Trust (BUY, €1.86), Elite UK REIT (ACCUMULATE, £0.39), and Prime US REIT (BUY, US$0.30).
Q: How attractive are current REIT valuations?
A: The sector trades at a forward dividend yield spread of 3.3% and P/NAV of 0.99x, which are viewed as attractive entry levels given the growth potential from declining financing costs.
Q: Which sub-sectors performed best and worst in Dec?
A: Overseas industrial REITs led with a 2.9% gain, while overseas commercial was the weakest, declining 1.9% primarily due to MUST’s performance.
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.
