UOB Kay Hian
Date of Report: 25 August 2025
Singapore REITs Set to Shine as Fed Signals Rate Cuts: Full Sector and Stock Analysis

Sector Overview: S-REITs Poised for Recovery Amid Global Rate Shift

The latest insights from the Jackson Hole Symposium have put Singapore REITs (S-REITs) back in the spotlight. With the US Federal Reserve signaling a likely turn toward monetary easing due to a cooling job market and transient inflation pressures, S-REITs are primed to benefit from renewed liquidity and a widening yield spread. UOB Kay Hian maintains an OVERWEIGHT stance on the sector, emphasizing the defensive nature and attractive yields of blue-chip REITs as interest rates head lower.

Key Takeaways from Jackson Hole: Monetary Policy at an Inflexion Point

US job creation has slowed sharply for three consecutive months (May–July), raising concerns about rising unemployment if the current labor market balance unravels.
US Fed Chair Jerome Powell signaled openness to rate cuts, with the next FOMC meeting on 16–17 September 2025 a potential pivot point.
Inflation remains contained, with recent upticks attributed to temporary factors like tariffs and supply chain shifts.
The effective US tariff rate has surged to 15.8%, but exemptions and supply chain adjustments have muted the inflationary impact.
Singapore’s status as a safe haven is reinforced by a persistent fiscal surplus, low reciprocal tariffs (10%), and a substantial drop in domestic interest rates.

Macroeconomic Trends and Policy Shifts: Setting the Stage for S-REITs

US job market: July 2025 saw the addition of just 73,000 jobs (vs. expectations of 100,000). Previous months’ figures were revised sharply lower—June to 14,000 (from 147,000), May to 19,000 (from 144,000).
Job openings in June fell by 275,000 to 7.4 million, with hiring at its lowest level in over a year.
Core PCE inflation (excluding food and energy) was stable at 2.8% YoY in June 2025. A one-off inventory-driven bump in 3Q25 is expected to be temporary.
Fed’s dot plot projects the Fed Funds Rate to drop to 3.9% by end-2025 and 3.6% by end-2026, implying two 25bp cuts in 2H25 and another in 2026.
Singapore’s three-month compounded SORA dropped 133bp to 1.74% in 8M25; 10-year government bond yield compressed 98bp YTD to 1.88%.

Top S-REIT Picks: Deep Dive and Financial Comparison

Singapore REITs offer defensive attributes and stable income streams, supported by long-term leases. UOB Kay Hian’s top picks are selected for their robust fundamentals, sector leadership, and clear catalysts. Below is a comprehensive peer comparison of the top recommended S-REITs:

In-Depth Company Analyses

CapitaLand Ascendas REIT (CLAR): Industrial Giant with Growth Catalysts

• Singapore portfolio comprises 65.5% of total valuation, benefitting from the low reciprocal tariff of 10%.
• Eight projects underway (developments, redevelopments, AEIs) across Singapore, US, and UK, valued at S\$850m.
• Target price set at S\$4.02, based on DDM (cost of equity: 6.5%, terminal growth: 2.5%).
• Attractive forward yield of 6.2% and a healthy P/NAV of 1.22x underline its leadership in the industrial REIT space.

Keppel DC REIT (KDCREIT): Riding the Data Centre and AI Wave

• Achieved a remarkable 51% positive rental reversion in 1H25, with major colocation lease renewals (notably SGP4).
• Acquisitions of SGP7 and SGP8 in Singapore were completed, ensuring full-year contributions in 2025.
• Beneficiary of relaxed US export restrictions on Nvidia and AMD AI chips to China, unlocking potential demand from AI startups and cloud providers for its Guangdong data centres.
• Target price: S\$2.69 (DDM: cost of equity 6.5%, terminal growth 2.75%).
• Forward yield at 4.6% and sector-high P/NAV of 1.46x reflect robust demand and premium asset quality.

Keppel REIT (KREIT): Office REIT with Regional Strength

• Strong 1H25 rental reversion: 12.3% overall (Singapore: 11.8%, Australia: >25%, South Korea: 30%, Japan: high single-digit).
• Average Singapore CBD office signing rent in 1H25: S\$12.77 psf pm (vs. expiring lease average of S\$11.37 psf pm for 2H25).
• Australia NPI up 17% YoY in 1H25, driven by higher occupancy at 2 Blue Street (North Sydney) and the newly acquired 255 George Street (Sydney CBD).
• Target price: S\$1.18 (DDM: cost of equity 6.0%, terminal growth 1.5%).
• Forward yield of 5.9% and low P/NAV of 0.78x offer value in the office space segment.

Lendlease Global Commercial REIT (LREIT): Retail/Commercial Play with Strategic Pipeline

• 87% of portfolio valuation in Singapore, with a strong focus on precinct dominance and asset quality.
• Sponsor pipeline of over S\$6b in Singapore, including PLQ Mall, PLQ Office, Paya Lebar Green, and Comcentre.
• Divestment of Jem’s office component (S\$462m) expected to cut leverage from 42.6% to 35%.
• Target to boost occupancy at Sky Complex Building 3 from 31% to 50% by end-2025.
• Target price: S\$0.79 (DDM: cost of equity 6.75%, terminal growth 2.2%).
• Forward yield of 6.5% and low P/NAV of 0.78x reinforce its appeal as a retail/commercial hybrid.

CapitaLand Ascott Trust (CLAS): Hospitality & Living Sector Leader

• 2Q25 REVPAU up 3% YoY to S\$159, driven by Australia, UK, US; average occupancy rose 3ppt to 78%.
• Living sector (student accommodation and rental housing) accounted for 16% of 1H25 gross profit and 17% of portfolio valuation.
• Planned acquisitions: student accommodations in US, UK, Australia and rental housing in Tokyo, Osaka, Fukuoka.
• Three more AEIs scheduled for 2025/2026 (South Korea, France, Japan), totaling five ongoing AEIs.
• Target price: S\$1.56 (DDM: cost of equity 6.75%, terminal growth 2.8%).
• Sector-leading forward yield of 7.4% and P/NAV of 0.77x.

Broader S-REIT Peer Comparison

For investors seeking a broader view of the sector, here’s a comparison across S-REITs by segment:

Sector Catalysts, Risks, and Outlook

• Singapore’s economy remains resilient, with pharmaceutical and semiconductor sectors set to gain from preferential tariffs.
• Limited new supply in the logistics and retail segments supports rental stability and growth.
• Risks: Potential secondary tariffs on Russia could result in punitive tariffs on China and India for energy product purchases.
• No changes to DPU forecasts; sector outlook remains positive with expected liquidity recovery as Fed cuts rates.

Conclusion: S-REITs Well-Positioned for a Rate-Cut Driven Rally

With the US Fed likely to cut rates in response to a slowing job market and transient inflation, and Singapore enjoying a status as a fiscal safe haven, S-REITs are set for a broad-based recovery. Investors seeking stable yields, defensive characteristics, and sector-specific catalysts should focus on blue-chip S-REITs such as CLAR, CLAS, KDCREIT, KREIT, and LREIT. The combination of policy tailwinds, robust asset quality, and strategic growth initiatives presents a compelling case for overweighting Singapore REITs in the coming quarters.