Real Estate Investment Trusts (REITs) are companies that allow investors to gain exposure to a diverse range of properties and enjoy regular income distribution. By law, REITs must distribute 90% of their profits as dividends to shareholders, making them a popular investment among income investors. In Singapore, there is a further incentive to invest in REITs, as income from the 40 traded Singapore REITs (S-REITs) and property trusts is tax-free.
At the REITs Symposium this past Saturday, jointly organised by ShareInvestor, InvestingNote, and the REIT Association of Singapore (REITAS), the first panel discussion brought together analysts from renowned financial institutions to share their insights on the current outlook for REITs in 2025. During the discussion, 4 REIT sectors kept coming up for consideration as they were likely going to do well in the year ahead.
#1 Data Centres
With developments in artificial intelligence (AI) and cloud services rapidly advancing and such technology being more widely adopted across businesses, the demand for data storage is increasing. Data centre assets will continue to be the likely beneficiary of such growth, shared Ms. Christine Li, Head of Research, Asia Pacific, Knight Frank.
In Singapore, two S-REITs, Keppel DC REIT and Digital Core REIT are focused purely on data centres, while three others have varying levels of exposure to data centres in their asset portfolio.
Of the $9.1 billion in Mapletree Industrial Trust’s assets under management, about 55.6% are data centres, according to their latest portfolio update, including 56 data centres situated across North America.
In CapitaLand Ascendas REIT’s multi-asset portfolio strategy, the data centre industry contributes about 10.2% of total monthly rental income, the fourth highest contributor.
Capitaland India Trust currently has 4 data centres in its portfolio and is looking to add another 5 in the long term.
Read Also: Singapore REITs With Data Centre Exposure For Your Retirement Portfolio
#2 Hospitality
As the world bounced back following the worst of the COVID-19 pandemic, the pent-up demand for overseas travel has boosted the travel, airline, and hospitality industries. According to Ms. Christine Li, travelers are demonstrating a preference for experiential hospitality, expecting unique and memorable experiences beyond just the basic hotel amenities.
Ms. Li pointed out the significant increase in average daily rate for ultra luxury hotel chain Marriott International, which includes the Ritz-Carlton brand.
DBS Group’s Mr. Derek Tan, Executive Director, Team Lead, Property, concurred with this, sharing his belief that hospitality REITs are currently trading at a discount, especially with the upcoming launch of Terminal 5 set to bring in more overseas travelers than ever before.
Five S-REITs are focused specifically on the hospitality industry, including CapitaLand Ascott Trust, Far East Hospitality Trust, CDL Hospitality Trust, Acrophyte Hospitality Trust, and Frasers Hospitality Trust.
Read Also: 5 Things You Need To Know About Investing In REITs In Singapore
#3 Retail
As with the hospitality sector, the retail sector is also expected to rebound as the number of overseas travelers increases. Knight Frank’s Ms. Christine Li’s assessment is that the effect of the pandemic has caused a rebalancing in the industry. As more workers find a new balance between commuting to the office and working from home, suburban malls are thriving more than ever. In fact, she points out, the difference in rentals in suburban malls and properties in Orchard Road is closer than ever.
DBS’ Mr. Derek Tan agreed that the retail sector is one to watch.
S-REITs in the retail sector include Frasers Centrepoint Trust, Paragon REIT, Starhill Global REIT, Lendlease Global Commercial REIT, and Sasseur REIT.
Read Also: REITs Report Card 2024: How Singapore REITs Performed
#4 Healthcare
Finally, the healthcare sector remains one of the best-performing sectors, resiliently defying the high interest rate environment, which adversely affected many other REITs. According to Mr. Derek Tan of DBS, healthcare will always be considered a safe haven, due to the constant need for it, even in periods of inflation.
Two S-REITs are solely focused on the healthcare sector, Parkway Life REIT and First REIT. The former is one of Asia’s largest healthcare REITs by asset size, including Mount Elizabeth Hospital, Gleneagles Hospital, and Parkway East Hospital in its portfolio.
Read Also: Investing in REIT ETFs Listed In Singapore: 5 Things You Need To Know
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