CGS International
July 30, 2025
Keppel REIT Shines Amid Singapore Office Market: In-Depth Analysis, Peer Comparison, and ESG Highlights
Keppel REIT: 1H25 Performance and Strategic Outlook
Keppel REIT (KREIT) has delivered a robust performance in the first half of 2025, underscoring the resilience of its Singapore assets and its ongoing focus on portfolio optimization. The REIT reported a 1H25 distribution per unit (DPU) of 2.72 Singapore cents, representing 50.2% of the full-year forecast, and maintained its commitment to achieving double-digit positive rental reversions for FY25.
- 1H25 Revenue and Net Property Income (NPI): Revenue and NPI rose by 9.1% and 11.8% year-on-year to S\$136.5 million and S\$108.3 million, respectively. Key contributors included 255 George St and improved occupancy at 2 Blue St in Australia, alongside positive rental reversions.
- Distribution Income: 1H25 distribution income dipped by 1.3% year-on-year to S\$105.5 million, primarily due to a higher proportion of management fees paid in cash instead of units.
- Portfolio Occupancy: Committed occupancy remained stable at 95.9%. Lower occupancy at select Singapore and Australian properties was offset by stronger uptake at Ocean Financial Centre (OFC) and 255 George St. The REIT renewed or leased approximately 559,000 sq ft in 1H25, with robust leasing demand from banking, insurance, financial services, TMT, real estate, manufacturing, and distribution sectors.
- Rental Reversions: Portfolio rental reversion averaged +12.3% in 1H25, with average signing rents for Singapore leases at S\$12.77 psf/month. Only 2.8% of leases are up for renewal in 2H25 and a further 19.4% in FY26, positioning KREIT well for continued healthy rental reversions.
Capital Management and Funding Costs
- Aggregate Leverage: 41.7% as at 1H25, with 63% of debt on fixed rates.
- Interest Cost: Slightly decreased quarter-on-quarter to 3.51%, with an adjusted interest coverage ratio (ICR) of 2.6x.
- Funding Cost Outlook: Management expects funding cost to have peaked in 1H25 amid a declining interest rate trend and is targeting further portfolio optimization and capital structure improvement.
Financial Summary: Five-Year Snapshots
| Financial Metric |
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Gross Property Revenue (S\$m) |
233.1 |
261.6 |
288.6 |
298.0 |
310.7 |
| Net Property Income (S\$m) |
182.4 |
201.9 |
226.5 |
233.3 |
243.1 |
| Net Profit (S\$m) |
178.0 |
108.4 |
171.7 |
187.8 |
205.9 |
| Distributable Profit (S\$m) |
218.7 |
214.5 |
210.4 |
223.8 |
231.6 |
| Core EPS (S\$) |
0.041 |
0.040 |
0.044 |
0.048 |
0.052 |
| Core EPS Growth (%) |
(1.0%) |
(3.7%) |
12.3% |
8.3% |
8.6% |
| FD Core P/E (x) |
23.59 |
24.41 |
21.83 |
20.15 |
18.55 |
| DPS (S\$) |
0.058 |
0.056 |
0.054 |
0.057 |
0.059 |
| Dividend Yield (%) |
5.98 |
5.77 |
5.59 |
5.89 |
6.03 |
| Asset Leverage |
28.3% |
31.4% |
31.5% |
31.6% |
31.6% |
| BVPS (S\$) |
1.32 |
1.27 |
1.26 |
1.24 |
1.23 |
| P/BV (x) |
0.73 |
0.76 |
0.77 |
0.78 |
0.79 |
| Recurring ROE (%) |
3.06 |
3.06 |
3.52 |
3.86 |
4.24 |
Peer Comparison: Singapore REIT Sector Breakdown
Keppel REIT is benchmarked against a broad array of major Singapore REITs across hospitality, industrial, office, retail, overseas-centric, and healthcare segments. Here’s a summary of key peer data (as at July 30, 2025):
| REIT |
Ticker |
Rec. |
Price (LC) |
Target Price (LC) |
Mkt Cap (US\$m) |
Leverage (%) |
NAV (LC) |
P/NAV |
Dividend Yield FY25F |
Dividend Yield FY26F |
Dividend Yield FY27F |
| Hospitality |
| CapitaLand Ascott Trust |
CLAS SP |
Add |
0.91 |
1.13 |
2,674 |
39.6 |
1.12 |
0.81 |
6.8% |
7.0% |
7.0% |
| CDL Hospitality Trust |
CDREIT SP |
Add |
0.83 |
0.87 |
808 |
42.0 |
1.48 |
0.56 |
6.2% |
7.3% |
7.6% |
| Far East Hospitality Trust |
FEHT SP |
Add |
0.61 |
0.74 |
954 |
32.8 |
0.92 |
0.66 |
6.3% |
6.4% |
6.5% |
| Frasers Hospitality Trust |
FHT SP |
NR |
0.70 |
NA |
1,048 |
35.0 |
0.64 |
1.09 |
4.6% |
5.0% |
5.2% |
| Industrial |
| AIMS AMP AAREIT |
AAREIT SP |
NR |
1.39 |
NA |
825 |
33.7 |
1.26 |
1.10 |
7.4% |
7.4% |
7.5% |
| CapitaLand Ascendas REIT |
CLAR SP |
Add |
2.86 |
3.10 |
10,193 |
38.9 |
2.20 |
1.30 |
5.4% |
5.5% |
5.7% |
| ESR-REIT |
EREIT SP |
Add |
2.83 |
3.55 |
1,756 |
42.6 |
2.66 |
1.06 |
7.7% |
8.0% |
8.1% |
| Frasers Logistics & Commercial Trust |
FLT SP |
Add |
0.90 |
1.11 |
2,611 |
36.1 |
1.08 |
0.83 |
6.4% |
6.0% |
6.1% |
| Keppel DC REIT |
KDCREIT SP |
Add |
2.38 |
2.48 |
4,155 |
30.0 |
1.58 |
1.51 |
4.2% |
4.3% |
4.5% |
| Mapletree Industrial Trust |
MINT SP |
Add |
2.07 |
2.49 |
4,567 |
40.1 |
1.69 |
1.22 |
8.5% |
8.1% |
8.1% |
| Mapletree Logistics Trust |
MLT SP |
Add |
1.19 |
1.63 |
4,673 |
41.2 |
1.26 |
0.94 |
6.8% |
6.3% |
6.2% |
| Stoneweg Europe Stapled Trust |
SERT SP |
Add |
1.58 |
1.93 |
1,016 |
42.9 |
1.98 |
0.80 |
8.4% |
8.6% |
9.0% |
| Office |
| Keppel REIT |
KREIT SP |
Add |
0.97 |
1.08 |
2,912 |
41.7 |
1.21 |
0.80 |
5.6% |
5.9% |
6.0% |
| OUE REIT |
OUEREIT SP |
Add |
0.30 |
0.33 |
1,258 |
40.3 |
0.57 |
0.52 |
6.7% |
7.4% |
7.7% |
| Suntec REIT |
SUN SP |
Hold |
1.20 |
1.26 |
2,731 |
41.1 |
1.99 |
0.60 |
5.2% |
5.5% |
5.8% |
| Retail |
| CapitaLand Integrated Commercial |
CICT SP |
Add |
2.24 |
2.45 |
12,681 |
38.7 |
2.09 |
1.07 |
5.0% |
5.3% |
5.5% |
| Frasers Centrepoint Trust |
FCT SP |
Add |
2.25 |
2.70 |
3,533 |
42.8 |
2.22 |
1.01 |
5.4% |
5.5% |
5.7% |
| Lendlease Global Commercial REIT |
LREIT SP |
Add |
0.56 |
0.69 |
1,060 |
38.0 |
0.74 |
0.76 |
7.0% |
7.1% |
7.2% |
| Mapletree Pan Asia Commercial Trust |
MPACT SP |
Add |
1.31 |
1.48 |
5,342 |
37.7 |
1.78 |
0.74 |
6.1% |
6.3% |
6.5% |
| Starhill Global REIT |
SGREIT SP |
Add |
0.55 |
0.60 |
978 |
36.2 |
0.69 |
0.80 |
6.6% |
6.7% |
6.7% |
| Overseas-centric |
| CapitaLand China Trust |
CLCT SP |
NR |
0.78 |
NA |
927 |
42.6 |
1.09 |
0.72 |
7.7% |
7.9% |
8.0% |
| Elite UK REIT |
ELITE SP |
Add |
0.34 |
0.38 |
273 |
43.0 |
0.40 |
0.85 |
8.8% |
8.9% |
8.9% |
| Manulife US REIT |
MUST SP |
Add |
0.07 |
0.13 |
117 |
60.8 |
0.23 |
0.29 |
0.0% |
41.8% |
48.5% |
| Sasseur REIT |
SASSR SP |
Add |
0.68 |
0.85 |
661 |
25.9 |
0.83 |
0.82 |
9.1% |
9.3% |
9.7% |
| Healthcare |
| Parkway Life REIT |
PREIT SP |
Add |
4.05 |
4.91 |
2,044 |
36.1 |
2.42 |
1.67 |
3.8% |
4.2% |
4.3% |
ESG Performance: Sustainability at the Core
Keppel REIT has made significant strides in its ESG journey, scoring a B overall (B+ for Environmental and Social, B- for Governance). Notable achievements include:
- Reduction of Scopes 1 and 2 emissions by 22.5% since 2019.
- Energy usage down by 19.5%, renewable energy usage at 25.3% of portfolio (targeting 40% by 2030).
- Water consumption reduced by 16.4%; 16.2% of waste recycled.
- Over 1,100 hours dedicated to community outreach in 2024.
- 82% of 2024 borrowings are green loans, well above the 50% target, with a new goal to maintain at least 75% sustainability-focused funding from 2025.
- All Singapore assets hold BCA Green Mark Platinum status; Australian properties rated 5 Stars or higher under NABERS Energy.
- Retained 4-Star Green Star Status and ‘A’ rating for Public Disclosure at GRESB 2024.
Areas for improvement remain, with lower scores in environmental innovation and community/CSR strategy, but ongoing progress in governance and sustainability targets may further enhance Keppel REIT’s appeal to ESG-focused investors.
Key Financial and Operational Drivers
- Occupancy Rate: Projected to steadily increase, reaching 98.3% by FY27F.
- Rental Rates: Expected to grow from S\$10.0 psf (2023) to S\$11.3 psf (2027).
- Net Lettable Area: Stable at approximately 3.64 million sq ft.
- Net Property Income Margin: Consistently above 77% through the forecast period.
- Gross Interest Cover: Improving from 1.53x (2024) to 1.91x (2027).
- Dividend Payout Ratio: Trending downward to a sustainable 112% by 2027.
Balance Sheet Strength
Keppel REIT’s balance sheet remains healthy, with total investments exceeding S$8.3 billion and total equity projected to expand to S$5.68 billion by FY27. The current ratio, while modest (0.23 in FY27F), is consistent with sector norms for REITs.
Risks and Strategic Outlook
Potential downside risks include:
- Extended frictional vacancies from tenant movements or a slower-than-expected backfilling of office space.
- Reduced demand for office space due to the adoption of hybrid work models.
Strategically, Keppel REIT is focused on boosting portfolio occupancy, increasing average passing rents, and enhancing capital efficiency through portfolio optimization.
Recommendation and Target Price
Keppel REIT receives an “Add” rating with a target price of S$1.08, reflecting an 11.3% upside from the current price of S$0.97. The broker maintains its positive outlook, with key catalysts expected from occupancy improvements and rental growth. The current consensus among analysts stands at 9 Buys, 6 Holds, and 1 Sell.
Conclusion
Keppel REIT stands out among Singapore office REITs for its resilient portfolio, attractive yield, and strong ESG credentials. With prudent capital management, proactive leasing, and a clear sustainability roadmap, it remains a compelling choice for investors seeking exposure to premium office assets in Singapore and Australia.
Coverage Universe: All Companies and REITs in Detail
This comprehensive analysis includes all major Singapore-listed REITs across various sectors—hospitality, industrial, office, retail, overseas-centric, and healthcare. Each company is benchmarked for leverage, price-to-NAV, and forward dividend yields, enabling investors to make informed decisions within the broader REIT landscape.
Broker’s Recommendation Framework
- Add: Total return expected to exceed 10% over the next 12 months.
- Hold: Total return expected between 0% and 10%.
- Reduce: Total return expected to fall below 0%.
The sector and country ratings range from Overweight to Underweight, guiding investors toward optimal portfolio positioning relative to market benchmarks.
Final Thoughts
Keppel REIT, supported by robust fundamentals, sector-leading ESG initiatives, and a favorable risk-reward profile, is well-positioned to deliver value for investors in the evolving Singapore and Asia-Pacific office landscape.
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