In a forecast that’s set to excite investors, DBS Group Research predicts a revival for Singapore REITs (S-REITs) after a two-year slump. Distribution per unit (DPU) is expected to rebound with 3.4% growth across FY2025 and FY2026, driven by a stabilizing operating environment and expectations of gradual interest rate cuts.
Interest Rates and Investor Moves
The rollercoaster ride of 2024 saw S-REIT share prices swing wildly, erasing much of the 14% gains from Q3 as rate-cut expectations fluctuated following Donald Trump’s return to the US presidency. However, DBS analysts Derek Tan and Geraldine Wong believe the tide is turning. A 50-60 basis point drop in base rates during 2H2024 signals a tapering off of refinancing pressures. If interest rates dip by another 1%, DBS projects a 2.5% uptick in DPU—a boost yet to be reflected in their forecasts.
Retail investors are poised to play a critical role, with over $90 billion in six-month Treasury bills set to mature by mid-2025, creating opportunities for capital reinvestment in S-REITs. DBS highlights that S-REITs, trading at 0.8 times price-to-book (P/B) with yields of 6.2%-6.3%, present an attractive alternative to bonds, deposits, and T-bills currently yielding 3.0%.
Sectoral Preferences and Risks
DBS analysts are particularly bullish on retail, industrial, office, and hotel REITs, in that order. However, geopolitical uncertainties and an uptick in supply for logistics, hotel, and business park assets temper the optimism. Consequently, DBS advises a conservative sectoral stance.
Spotlight on Parkway Life REIT
Among the top performers, Parkway Life REIT emerges as a “dark horse,” with the potential for a significant 20% jump in its DPU by FY2026 after a master lease reset. This reset is expected to elevate yields beyond historical averages, cementing Parkway Life REIT’s place as a standout opportunity in the sector.
Other Notable Players
Leaders projected to deliver near pre-rate hike DPU levels include Far East Hospitality Trust, Frasers Centrepoint Trust, Keppel REIT, and Mapletree Industrial Trust. These REITs are seen as undervalued, with DBS suggesting they should be trading at 2021-2022 levels.
DBS’s Top Picks
DBS’s highlighted recommendations for 2025 include:
- Frasers Centrepoint Trust: Target price $2.75
- CapitaLand Integrated Commercial Trust: $2.30
- Mapletree Logistics Trust: $1.75
- Mapletree Industrial Trust: $2.75
- Keppel REIT: $1.15
- Parkway Life REIT: $4.80
As 2025 unfolds, investors are encouraged to keep a keen eye on S-REITs, particularly Parkway Life REIT, which may well deliver outsized returns and drive sectoral resurgence.
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