[SINGAPORE] The S-Reit sector delivered a stable performance in the first half of 2025, with the iEdge S-Reit index gaining 0.6 per cent to 1,010.73 as at Thursday (Jun 26), and dividends taking the index total returns to 3.2 per cent for the period.
More than half the 30 constituents on the iEdge S-Reit index delivered positive total returns in the first six months of the year, and the top five performers delivered double-digit total returns over the period.
These outperformers were Frasers Hospitality Trust (FHT), CapitaLand Integrated Commercial Trust (CICT), First Reit, Frasers Centrepoint Trust (FCT) and Parkway Life Reit. Their year-to-date total returns ranged between 10 and 21.4 per cent as at Thursday.
Most of the outperformers in the first half reported robust operating performance with stable occupancy and positive rental reversions.
FCT’s revenue and net property income (NPI) grew by 7.1 per cent and 7.3 per cent on year to S$184.4 million and S$133.7 million, respectively, in H1 2025. This growth was primarily driven by increased occupancy and passing rent across its portfolio of malls, and the completion of asset enhancement initiatives at Tampines 1. Distribution per unit (DPU) grew 0.5 per cent to S$0.06054.
Similarly, ParkwayLife Reit reported higher gross revenue in Q1 2025, arising from the contribution of nursing homes acquired in Japan and France. Its DPU rose 1.3 per cent to S$0.0384.
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On a like-for-like basis, CICT charted growth in Q1 gross revenue and NPI of 1.1 per cent and 1.4 per cent, respectively, and it continued achieving higher signing rents for new and renewed leases.
FHT’s outperformance came on the back of a proposed privatisation.
The Reit sector trades at compelling valuations relative to its historical average.
As of end-May, the forward dividend yield for the FTSE ST Reit Index was around 6.4 per cent, representing a yield spread of nearly four percentage points to benchmark 10-year Singapore Government Bond yields, higher than the 10-year average.
In terms of price-to-book ratio, the sector trades under 0.8 times, below the 10-year average of 1.0 times. The strongest performing S-Reits on the iEdge S-Reit index in the first half of 2025 were also among those with the highest price-to-book ratios currently.
The top seven performers in H1 have price-to-book ratios of between 1.0 and 1.7 times, higher than the sector average.
For the first half of 2025, retail investors were net buyers of S-Reits, with the sector receiving total net inflow of around S$400 million as at Jun 26.
Institutional investors were net sellers of S-Reits over the period, with over S$500 million in net outflows. However, some S-Reits (including CICT, FHT and ParkwayLife Reit) bucked the trend and recorded net institutional inflows in H1. Institutions have also been net-buying the Reit sector in recent weeks with more than S$100 million in net inflows for the five sessions to Jun 26.
As the second half approaches, investors will be watching for the path of interest rates as well as continued operational resilience.
While the US Federal Reserve has so far not cut interest rates in 2025, expectations are for several rate cuts to come later in the year.
In Singapore, domestic interest rates have also been falling, with the three-month compounded Singapore Overnight Rate Average slipping from 3.0227 on Jan 2 to 2.0797 on Jun 26.
Analysts watching the sector have noted that the decline in local borrowing rates has not triggered significant unit price movements for the sector thus far. However, investor sentiment may improve if global interest rates abroad are eventually cut.
The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the S-Reits & Property Trusts Chartbook.
