OUE REIT Bets on Singapore Safe-Haven Appeal, Balances Office Stability with Tourism Upside

SGX:TS0U.SI:OUE REIT

OUE REIT is positioning itself as a rare all-Singapore play among S-REITs, offering a distribution yield of about 5.7% as of Sept 1. With global uncertainty pushing investors toward Singapore’s safe-haven assets and strong currency, analysts say its pure-domestic portfolio could see a re-rating.

Portfolio Realignment

In December 2024, OUE REIT exited China by divesting Shanghai’s Lippo Plaza, leaving a portfolio anchored in prime Singapore assets:

• Office: OUE Bayfront, One Raffles Place, OUE Downtown (CBD)

• Hotels: Hilton Singapore Orchard, Crowne Plaza Changi Airport (1,655 rooms)

• Retail: Mandarin Gallery, integrated with Hilton

CEO Han Khim Siew said the REIT’s prime core assets allow flexibility to realign and preserve capital for unitholders.

Retail Resilience at Mandarin Gallery

Despite shifts in spending — with Chinese tourists pulling back from luxury to focus on F&B and experiences — Mandarin Gallery posted a 34.4% YoY rent reversion in 2Q2025. Committed occupancy hit 99%, above pre-Covid levels.

Han said curating a unique tenant mix has been key. Examples include Rimowa’s flagship store and Singapore’s first Korean samgyetang specialty restaurant, Modu, both attracting steady queues.

Still, retail tenants cite labour shortages as a challenge.

Tourism Tailwinds

Tourist arrivals have rebounded to 16 million in 2024, with 2025 forecasts at 17–18.5 million — below 2019’s 19 million peak. Hotels contributed 33% of REIT revenue in June 2025, with guests mainly from North and Southeast Asia.

Hilton Singapore Orchard and Crowne Plaza Changi Airport run on master leases with OUE, offering minimum annual rent guarantees of $45 million and $22.5 million respectively, shielding the REIT from downside while retaining performance-linked upside.

Han acknowledged Singapore’s strong dollar is weighing on room rates and spending, but sees long-term support from a rising middle class across Asia.

Office Strength Anchors Earnings

Offices remain OUE REIT’s backbone, contributing 52% of revenue. CBD Grade A occupancy is tight, with no major new supply beyond 2027. In 2Q2025, office committed occupancy stood at 95.5%, above the market’s 94.7%. Rents averaged $10.86 psf/month, with rental reversions of 9.1% — extending 12 consecutive quarters of positive growth.

“Even when investors doubted office growth, we delivered consistent reversions,” Han said. Foreign investors, once sceptical, are now returning to Singapore’s office sector.

Strengthened Balance Sheet

Since becoming CEO in 2022, Han has secured an investment-grade credit rating, cutting financing costs. OUE REIT priced seven-year green notes at 3.9% in 2023, later tightened to 3.78%. In 1H2025, finance costs fell 17.3% YoY, with all funding in Singapore dollars, benefiting from falling SORA rates and avoiding FX volatility.

Outlook

Han says OUE REIT offers a de-risked, Singapore-only portfolio, supported by:

• Positive supply-demand in CBD offices

• Secular growth in hospitality and tourism

• Singapore’s role as a safe-haven market

“We’ve de-risked the portfolio; you have Singapore as a safe haven; the Singapore dollar remains strong; and long-term trends remain in our favour,” Han concluded.

Thank you