S-REITs Renaissance: 2025 Marks Strongest Rally in Six Years

After a challenging period of rising interest rates, Singapore Real Estate Investment Trusts (S-REITs) are staging a significant comeback. As we approach the end of 2025, the sector is poised to deliver its strongest yearly performance since 2019, driven by stable operating metrics and a much more supportive interest rate environment.

The Headlines Numbers

As of December 5, 2025, the iEdge S-REIT Index has posted a robust recovery:

• Price Appreciation: +9.3% year-to-date (YTD).

• Total Returns (including dividends): +14.7% YTD.

This marks the sector’s best performance since 2019, when the index saw total returns of 27.5%. The breadth of the recovery is also impressive; of the 33 constituents in the index, 29 have delivered positive total returns this year, with the top 10 performers exceeding 20%.

Top Performers of 2025

Diversified and commercial REITs have led the charge this year. According to data from Bloomberg and SGX, OUE REIT and Acrophyte Hospitality Trust topped the leaderboard with total returns exceeding 30%.

Here is a snapshot of the top 5 performers YTD:

The Catalyst: Falling Interest Rates

The primary driver behind this resurgence is the easing of borrowing costs. In 2025, the US Federal Reserve cut interest rates twice (September and October), building on three previous cuts in 2024. Markets are currently pricing in an 87% probability of another cut at the upcoming December 10 Fed meeting.

Closer to home, the impact is visible in the 3-month compounded SORA, which plummeted from 3.02% on Jan 2 to 1.25% on Dec 4.

This has directly improved the bottom line for many REITs:

• MPACT: Reported a 16.4% year-on-year drop in finance expenses in Q2 due to proactive debt reduction and favorable rates.

• OUE REIT: Saw finance costs decline by 19.7% to S$21.6 million in Q3.

Gerald Wong, a research analyst at Beansprout, noted that the Q3 results demonstrated how “falling interest rates visibly improved S-REITs performance,” with lower debt costs translating directly into higher distributable income.

Analyst Outlook: Playing Catch-Up?

Despite the double-digit returns, S-REITs have actually lagged the broader Singapore market. The Straits Times Index (STI) delivered total returns of over 25% during the same period.

Jonathan Koh of UOB Kay Hian views this as an opportunity, maintaining an “overweight” rating on the sector. He suggests that while S-REITs may not lead the decline during a correction, they are likely to “gradually catch up with the broader market”.

What to Watch in 2026:

• Active Management: Analysts favor REITs engaging in asset enhancements and selective acquisitions. Picks include Elite UK REIT, CapitaLand India Trust, and Digital Core REIT.

• Capex Increases: Fitch Ratings expects capital expenditure (Capex) to rise by 20-25% in 2025 as trusts invest in asset rejuvenation to capture rising demand in prime logistics, retail, and office spaces.