Keppel REIT’s Strategic Retail Expansion and Strong Office Demand Signal Upside Potential for Investors

Key Financial and Operational Highlights for 9M 2025

Keppel REIT continues to demonstrate resilience and growth, recording robust operational and financial metrics for the nine months ended September 2025. The REIT reported Net Property Income (NPI) of S\$161.3 million, representing a notable 8.6% year-on-year increase. This growth was driven by sustained demand for Singapore’s prime office space as well as the new contribution from 255 George Street, Sydney.

Aggregate leverage stands at 42.2%, and 65% of borrowings are on fixed rates, providing stability in a changing interest rate environment. The weighted average cost of debt has started to decline, now at 3.45% per annum, aided by falling benchmark rates and improved margins. Distributable income from operations is S\$144.6 million, with a 6.7% year-on-year rise to S\$155.3 million if management fees were paid entirely in units rather than partly in cash—a move that directly benefits unitholders.

Portfolio Strength and Leasing Performance

Keppel REIT’s portfolio remains anchored in premium office assets across Asia Pacific, with a high committed occupancy of 96.3% and a weighted average lease expiry (WALE) of 4.7 years. Rental reversions have been strong, achieving a 12.0% uplift, and a proactive leasing strategy resulted in approximately 1.46 million square feet of leases committed during the period. The top 10 tenants contribute 30.4% of committed gross rent, underpinning income stability.

Major Acquisition: Top Ryde City Shopping Centre—Strategic Retail Diversification

In a significant strategic shift, Keppel REIT announced the acquisition of a 75% interest in Top Ryde City Shopping Centre, a well-established regional retail asset in suburban Sydney. This move marks Keppel REIT’s first foray into the retail sector, expanding its exposure beyond office assets. The purchase price is A\$393.8 million (S\$334.8 million), translating to an attractive initial property yield of 6.7% and expected DPU accretion of 1.53% on a pro forma FY2024 basis (1.25% if management fees are paid entirely in units).

Top Ryde City is focused on non-discretionary retail and is strategically located on Sydney’s A3 arterial route, offering resilience and capitalising on rising consumer spending and population growth. This diversification is expected to enhance portfolio stability and long-term returns. The completion of this acquisition is expected by 1Q 2026 and could be a price-sensitive catalyst, given the move towards higher-yielding retail assets while maintaining a Singapore-centric, office-focused portfolio.

Capital Management and Debt Profile

Keppel REIT maintains disciplined capital management, with 82% of borrowings sustainability-focused. The debt maturity profile is well spread, with refinancing discussions underway for loans due in 1H 2026. Interest rate sensitivity remains manageable, with a +/-25bps move in rates impacting DPU by only ~0.09 cents per annum. The interest coverage ratio stands at a healthy 2.6x, and remains robust even under stress scenarios.

Market Review: Singapore, Australia, Seoul and Tokyo

Singapore’s office market continues its upward trajectory, with Grade A CBD rents rising to S\$12.20 psf pm and occupancy at 94.9%. Supply additions are moderate, supporting rent growth. In Australia, prime grade office occupancy is recovering, with Sydney CBD at 85.5% and North Sydney at 83.5%. The Seoul office market saw a temporary dip in occupancy due to tenant relocations, but demand remains strong. Tokyo’s Grade A office market remains resilient, with occupancy at 99.1% and stable rents.

ESG Excellence and Sustainability Credentials

Keppel REIT continues its leadership in sustainability, with all properties green certified and 82% of funding sustainability-focused. Notably, 2 Blue Street achieved a 6-star Green Star rating—the highest possible—while eight properties are fully powered by renewable energy. Five assets are carbon neutral, enhancing Keppel REIT’s attractiveness to ESG-conscious investors and tenants.

Portfolio Optimisation and Strategic Track Record

Keppel REIT’s strategic acquisitions and divestments over the years have delivered significant capital appreciation. Recent asset sales have returned gains of 17% to 243%, demonstrating effective capital recycling. The expansion into Japan (KR Ginza II) and retail (Top Ryde City) signal ongoing portfolio optimisation and a willingness to pursue growth in new sectors and markets.

Potential Price-Sensitive Catalysts for Investors

• The acquisition of Top Ryde City Shopping Centre marks a strategic move into retail, providing portfolio diversification, attractive yield, and DPU accretion. This could positively impact investor sentiment and share price.
• Sustained demand for Singapore prime office space and strong rental reversions support income stability and potential upside.
• Declining cost of debt and well-managed capital structure reduce risk and enhance returns.
• Market-leading ESG credentials position Keppel REIT favourably for future tenant and investor demand.

Conclusion

Keppel REIT’s 9M 2025 performance and strategic developments position it as a compelling investment for those seeking stable and growing returns. The retail sector entry, strong office demand, disciplined capital management, and ESG leadership create a powerful combination likely to support share price momentum and long-term value creation for unitholders.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or a solicitation to buy or sell any securities. Investors should conduct their own due diligence and consult their professional advisors before making investment decisions. The past performance of Keppel REIT is not necessarily indicative of future results. The information herein is based on public disclosures and may be subject to change.

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