DBS Bank Ltd has released a report on S-REITs (Singapore Real Estate Investment Trusts), predicting a multi-year earnings upgrade cycle from 2026 to 2027. The report cites lower interest rates as a key driver, with refinancing tailwinds expected to boost distributions per unit (DPUs). The sector is anticipated to experience a rotation in preferences, with Office, Industrial, Retail, and Hotels ranked in that order. Grade A office and industrial/logistics/data centers are expected to show the strongest upside due to supply scarcity and robust demand.
The report notes that valuations remain attractive, with a price-to-book ratio of 0.9x and a forecasted yield of 5.7% for FY26F. This presents a 3.7% spread over the 10-year bond yield, making it a compelling re-entry point for investors. Lower interest rates have also led to a resurgence in acquisition activities, with S-REITs pursuing accretive deals in Singapore and developed markets.
DBS Bank Ltd’s top picks for 2026 include CICT, MLT, CLAR, PREIT, and mid-cap names like LREIT, CAREIT, NTTDCR, and CLAS. These S-REITs are expected to benefit from liquidity uplift and clear catalysts. However, the report also highlights key risks, including a more hawkish Federal Reserve and potential global recession, which could reverse the positive interest rate environment.
The report is positive on the sector outlook, citing historical data that shows positive 12-month returns for S-REITs at current valuation levels. Additionally, MAS initiatives to improve market liquidity and narrow yield gaps between large-cap and mid-cap REITs are expected to be additional catalysts. Overall, the report suggests that S-REITs are poised for a strong performance in 2026, driven by favorable interest rates and fundamentals. Clients of DBS Bank Ltd can access the full report on the bank’s website.