Singapore’s Real Estate Investment Trust (S-Reit) sector delivered stable returns in the first half of 2025, supported by resilient fundamentals and attractive valuations, even as investor flows diverged between retail and institutional segments.

The benchmark iEdge S-Reit Index edged up 0.6 per cent to 1,010.73 as of Jun 26, while dividends boosted total returns to 3.2 per cent for the period.

Out of the 30 constituents on the index, more than half posted positive total returns in the first six months, with five S-Reits achieving double-digit gains. The top performers were Frasers Hospitality Trust (FHT), CapitaLand Integrated Commercial Trust (CICT), First Reit, Frasers Centrepoint Trust (FCT), and Parkway Life Reit, generating total returns ranging from 10 per cent to 21.4 per cent.

Top Performers Driven by Fundamentals

Many of these outperformers reported stable occupancy rates and positive rental reversions during the period.

FCT reported 7.1 per cent revenue growth to S$184.4 million, with net property income (NPI) climbing 7.3 per cent to S$133.7 million in H1 2025. This was aided by higher occupancies and rental rates, particularly following upgrades at Tampines 1 mall. Distribution per unit (DPU) rose 0.5 per cent to S$0.06054.

Meanwhile, Parkway Life Reit posted higher Q1 revenue, driven by newly acquired nursing homes in Japan and France, with DPU rising 1.3 per cent to S$0.0384.

CICT delivered modest year-on-year growth of 1.1 per cent in gross revenue and 1.4 per cent in NPI, while achieving higher rents on new and renewed leases.

FHT’s gains came largely on the back of a proposed privatisation deal, which boosted sentiment.

Sector Valuations Remain Attractive

Despite muted price movements, S-Reits continue to trade at attractive valuations:

• The forward dividend yield of the broader FTSE ST Reit Index stood at 6.4 per cent as of May-end, with a yield spread of nearly 4 percentage points over 10-year Singapore government bonds.

• The sector’s price-to-book ratio sits below 0.8 times, versus the 10-year average of 1.0.

Notably, the top seven performers in H1 2025 have price-to-book ratios between 1.0 and 1.7, above the sector mean.

Retail Buys, Institutions Sell

Retail investors were net buyers of S-Reits in H1 2025, pumping in S$400 million of net inflows by Jun 26.

In contrast, institutional investors pulled out over S$500 million, although names like CICT, FHT, and Parkway Life Reit bucked the trend with net institutional inflows.

Institutional sentiment appears to be turning; in the five sessions leading to Jun 26, the sector saw over S$100 million in net institutional inflows.

Lower Interest Rates in Focus for H2

As attention shifts to the second half of the year, investors are keenly watching the trajectory of global and local interest rates.

While the US Federal Reserve has yet to implement cuts in 2025, market expectations suggest that easing could begin later in the year.

Locally, the three-month compounded Singapore Overnight Rate Average (SORA) has already dropped from 3.0227 on Jan 2 to 2.0797 on Jun 26.

Despite falling borrowing costs, unit prices have remained largely stable. However, analysts note that a definitive shift in global rate policy could rekindle sentiment for yield-oriented investments like S-Reits.

“The sector remains supported by solid operational metrics, high yields, and favourable valuation,” said a market strategist. “If interest rates ease globally, the upside could accelerate.”

As the year unfolds, the combination of steady fundamentals, high dividend yields, and a potential tailwind from rate cuts may set the stage for stronger performance in H2 2025.

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