Report Summary

• S-REITs are set to enter a multi-year earnings upgrade cycle (2026-2027) supported by lower interest rates, with refinancing tailwinds expected to boost distributions per unit (DPUs).
• Sector rotation and preference for 2026: Office > Industrial > Retail > Hotels, with Grade A office and industrial/logistics/data centres showing the strongest upside due to supply scarcity and robust demand.
• Valuations remain attractive at 0.9x P/B and FY26F yields of 5.7%, offering a 3.7% spread over the 10-year bond yield and presenting a compelling re-entry point for investors.
• Lower interest rates have reactivated acquisition activities, with S-REITs able to pursue accretive deals in Singapore and developed markets, further supporting growth.
• Top picks for 2026 include CICT, MLT, CLAR, PREIT, and mid-cap names like LREIT, CAREIT, NTTDCR, and CLAS, all benefiting from liquidity uplift and clear catalysts.
• Key risks include a more hawkish FED and potential global recession, which could reverse the positive interest rate environment.
• MAS initiatives to improve market liquidity and narrowing yield gaps between large-cap and mid-cap REITs are expected to be additional catalysts.
• Historical data shows positive 12-month returns for S-REITs at current valuation levels, supporting a positive sector outlook going into 2026.