S-REITs Poised for Rebound as Tariff Tensions Ease

UOB Kay Hian Research Report | April 4, 2025

The Singapore real estate investment trust (S-REIT) sector is showing signs of a resurgence, as the impact of recent trade tariffs appears to be waning. According to the latest research report from UOB Kay Hian, S-REITs are well-positioned to regain lost ground, with several defensive sectors offering attractive opportunities for investors.

Defensive Sectors Shine

The report highlights that suburban retail, healthcare, and data center REITs are relatively more sheltered from the direct impact of reciprocal tariffs imposed by the United States. Analysts at UOB Kay Hian recommend focusing on the following top picks in these defensive sectors:

Suburban Retail:

– CapitaLand Integrated Commercial Trust (CICT): Target price of S\$2.37 – Lendlease REIT (LREIT): Target price of S\$0.72

Healthcare:

– Parkway Life REIT (PREIT): Target price of S\$4.85

Data Centers:

– Digital Core REIT (DCREIT): Target price of US\$0.88 – Keppel DC REIT (KDCREIT): Target price of S\$2.55 – Mapletree Industrial Trust (MINT): Target price of S\$2.70

S-REITs Offer Defensive Strength

The report highlights several key factors that contribute to the defensive nature of the S-REIT sector:

Stable Cash Flows:

S-REITs have long-term leases, ranging from 3 to 10 years, which provide stable and resilient cash flows.

Negative Correlation with S&P 500:

Analysis shows that the FTSE ST All-Share REITs Index (FSTREI) has a negative correlation of 0.59 against the S&P 500 Index over the past five years. This suggests that S-REITs could potentially register gains even as the broader market falls.

Lower Volatility:

S-REITs have been less volatile compared to their US counterparts, making them a more attractive investment option during uncertain times.

Sector Catalysts and Risks

The report identifies several key catalysts that could drive the S-REIT sector’s performance, including:
Upcoming interest rate cuts by the ECB, BOE, and RBA
Relatively lower impact of tariffs on defensive sectors like suburban retail, healthcare, and data centers
The report also highlights potential risks, such as the escalation of geopolitical tensions, that investors should monitor.

Conclusion

Overall, the UOB Kay Hian research report paints a positive outlook for the S-REIT sector, with defensive sectors offering attractive investment opportunities. By focusing on well-positioned REITs in suburban retail, healthcare, and data centers, investors may be able to capitalize on the sector’s resilience and potential for outperformance.