Money and Me: S-REITs in the Spotlight — Rate Cuts, New Indices, and the Next Wave of Growth

23rd Sep 2025

How could the new iEdge Singapore Next 50 Indices reshape valuations, visibility, and investor opportunities.

Hosted by Michelle Martin, this episode dives into how the Next 50 indices could unlock liquidity, ETF flows, and future growth for S-REITs within a context of falling rates.

REIT specialist and Wealth Advisory Director, Kenny Loh breaks down the impact of falling borrowing costs and where income-focused investors should be looking now.

From Centurion Accommodation REIT’s IPO to data centres, retail, and healthcare REITs – find out which sub-sectors are set to shine.

Q&A Section

1. The launch of the iEdge Singapore Next 50 indices marks a new chapter for the mid-cap segment of the market. How are S-REITs positioned within these new benchmarks, and why do they have such significant representation?

Kenny: S-REITs represent 16 of the 50 constituents, accounting for around 44% of the iEdge Singapore Next 50 Index by weight. This prominence reflects their importance in Singapore’s market, their stable business model, and strong investor demand for defensive, income-generating assets. It also underscores Singapore’s reputation as Asia’s REIT hub, with mid-cap S-REITs fitting the liquidity and capitalization criteria for index inclusion.

2. How will being a constituent of these new indices affect a REIT’s liquidity and valuation? Will this attract new capital flows, and from what type of investors?

Kenny: Index inclusion usually improves liquidity and valuation due to greater visibility, eligibility for index-linked ETFs, and capital inflows from passive and institutional investors seeking diversified mid-cap exposure. Historically, such inclusion has drawn capital from both retail and institutional investors, as it provides new exposure with lower correlation to the STI.

3. Could these new indices boost the overall S-REIT index, given that many of the components overlap?

Kenny: Yes. With significant overlap, positive re-rating and flows into the new indices could spill over into the broader S-REIT index, supporting prices and narrowing performance gaps. Increased investor attention and fund inflows often enhance sentiment across the sector. For REIT managers, index inclusion creates measurable targets, motivating better engagement, transparency, and accountability.

4. Will these new indices lead to the creation of new investment products such as S-REIT-focused ETFs or index funds? What are the benefits and risks for retail investors?

Kenny: It’s highly likely that new ETFs or index funds will follow. The benefits include diversification, reduced single-stock risk, and easy access for retail investors. Risks include management fees, high REIT concentration, and vulnerability if interest rate cycles or the economy turn adverse. In downturns, blue-chip REITs tend to hold up better than smaller or mid-cap names.

5. How do you see the performance of the iEdge Singapore Next 50 compared to the iEdge S-REIT Index or the FTSE ST REIT Index?

Kenny: Historically, the iEdge Singapore Next 50 delivered ~5% annual returns over 10 years, lower than the S-REIT and FTSE ST REIT indices which typically outperform due to their blue-chip focus. However, year-to-date 2025, the Next 50 has outperformed the STI (25% vs 19%), driven largely by REIT strength in a falling rate environment.

Fed Rate Cut Impact

6. The U.S. Federal Reserve recently cut rates by 25 basis points. How will this impact the Singapore REIT sector?

Kenny: Lower borrowing costs improve REITs’ debt serviceability, boost DPU, and make yields more attractive compared to bonds. This should support property values, investor demand, and overall sector performance.

7. Which specific S-REITs will benefit the most?

Kenny: REITs with higher gearing, significant floating-rate debt, or near-term refinancing needs—particularly in the industrial and retail sectors—stand to benefit the most. Those with substantial Singapore-dollar borrowings may see quicker savings, as SORA tends to fall faster than U.S. interest rates.

8. With rates falling, refinancing activity is picking up. How significant is this trend, and how will it translate into higher DPU?

Kenny: It’s very significant. Refinancing at lower rates immediately improves interest coverage and frees up distributable cash, which translates into higher DPUs. That said, REITs need to weigh interest savings against the costs of early loan termination.

9. How quickly will investors see the benefits in DPU?

Kenny: Generally within the next quarterly DPU report after refinancing, with greater impact as older high-cost debt rolls off in subsequent periods.

10. The S-REIT index has recovered but still lags the broader STI. What explains this divergence, and will the gap close?

Kenny: REITs underperformed due to past rate hikes, while banks and industrial stocks drove STI gains. With U.S. 10-year yields still elevated above 4%, REITs remain cautious. But as risk-free rates decline and DPU growth resumes, the performance gap could narrow.

11. Beyond rates, how are sub-sectors like retail, office, industrial, and hospitality performing?

Kenny: Industrial and logistics REITs are strong, driven by resilient demand and limited supply. Hospitality REITs lag on weaker DPUs, while retail and office REITs have been resilient. Data center REITs are well-positioned given AI-driven demand, with more acquisitions expected as financing costs ease. In the U.S., commercial office properties may rebound as cheaper financing revives transaction activity.

Centurion Accommodation REIT IPO

12. Centurion Accommodation REIT (CAREIT) is Singapore’s first pure-play accommodation REIT. What are your thoughts on this niche focus?

Kenny: CAREIT provides exposure to purpose-built worker and student accommodation—defensive niches with stable occupancy and resilient demand. Pros: strong rental growth and predictable cash flows. Cons: regulatory risks, less diversification, and dependence on education or migrant trends.

13. CAREIT projects attractive yields of 7.47% (2026) and 8.11% (2027). How does this compare with other S-REITs?

Kenny: These yields are above the sector average of 5–6%, reflecting its niche profile and growth potential. The premium compensates for concentration risk and sector-specific exposure.

14. CAREIT’s initial portfolio spans Singapore, the UK, and Australia, backed by Centurion Corporation. How important is the sponsor’s support, and what risks come with this diversification?

Kenny: Sponsor backing is critical—it provides operational know-how, acquisition pipeline, and capital access. Geographic diversification balances local risks but introduces FX and regulatory uncertainties.

15. Considering the new indices, the Fed cut, and CAREIT’s IPO, how should investors position themselves over the next 12–18 months?

Kenny: Diversify with mid-cap and REIT-focused index ETFs, overweight S-REITs to capture refinancing and rate-cut benefits, and consider niche high-yield plays like CAREIT. This mix balances income, growth, and recovery potential in Singapore’s evolving market.

Note: The above analysis are my own personal views and are NOT buy or sell recommendations. Investors who would like to leverage my extensive research and years of Singapore REIT investing experience can approach me separately for a REIT Portfolio Consultation.

Listen to his previous market outlook interviews here:

2025

2024

2023

2022

2021

2020

Kenny Loh is an Associate Wealth Advisory Director and REITs Specialist of Singapore’s top Independent Financial Advisor. He helps clients construct diversified portfolios consisting of different asset classes from REITs, Equities, Bonds, ETFs, Unit Trusts, Private Equity, Alternative Investments, Digital Assets and Fixed Maturity Funds to achieve an optimal risk adjusted return. Kenny is also a CERTIFIED FINANCIAL PLANNER, SGX Academy REIT Trainer, Certified IBF Trainer of Associate REIT Investment Advisor (ARIA) and also invited speaker of REITs Symposium and Invest Fair.

You can join my Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement