Commentary: Amid the Iran war, is it all doom and gloom for Singapore-listed REITs?

SINGAPORE: To say that 2026 has been a volatile year thus far for equities would be an understatement. A year that kicked off on a high note with widespread anticipation of rising markets fuelled by falling interest rates has within three months turned into one where investors are climbing a wall of worry over energy shocks brought on by the war in Iran.

Correspondingly, the Singapore stock market has been in rough waters, reversing a good start to the year which saw the Straits Times Index (STI) busting through the 5,000-point level for the first time.

Through the ups and downs, however, one segment has been consistently lacklustre – the Singapore-listed real estate investment trusts or S-REITs.

While the benchmark STI has romped up about 25 per cent over the past year, S-REITs, as a whole, slipped by some 3 per cent in price terms. Even amid a strong market recovery in 2024, the average performance of S-REITS - in contrast to banks and other blue chips, as well as leading mid-caps - has been flat and uninspiring.

SIGNIFICANT ROLE IN LOCAL MARKET

Why does this matter?

It matters because since the listing of the first REIT in 2002, Singapore has built up one of the world’s biggest REIT markets. As of end-2025, Singapore has 41 REITs and property trusts with a combined market capitalisation of S$104 billion, representing close to 10 per cent of the stock market.

Blockbuster REIT listings are not unusual. There were two last year – NTT DC REIT’s US$773 million and Centurion Accommodation REIT’s S$771.1 million (US$601 million) listings, which make up the lion’s share of last year’s initial public offering (IPO) proceeds.

So far this year, there is UI Boustead REIT – Singapore’s first mainboard and REIT listing this year that raised about S$973.6 million - whose listing on Mar 12 amid war-induced jitters meant a dismal market debut. For now, the stock is still trading at about 9 per cent below its offer price.

It also matters because S-REITs are among the best yield plays globally – providing stable dividend returns of between 5 per cent to 7 per cent annually, making them a perennial investor favourite. Some, like recently listed UI Boustead REIT and China-based Sasseur REIT, promise payouts in the 8 per cent to 10 per cent range.

UNCERTAIN AND FOGGY OUTLOOK

Last year and 2026 were supposed to be cyclical rebound years for S-REITs after three years of high interest rates which spiked their borrowing costs and suppressed money available to dividend payouts. Market watchers were also anticipating a stronger REIT IPO pipeline this year compared to 2025, driven by easing interest rates.

But the war in Iran has thrown a huge spanner in the works.

The US Federal Reserve, at its last two rate-setting meetings in January and this month, has already paused its rate cuts as it adopts a wait-and-see attitude.

The fear is that if the war in the Middle East drags on, the resultant energy shock will fuel global inflation. If central banks respond by hiking interest rates, rising financing costs could again weigh on REIT players, many of whom have significant bank borrowings. Already, Australia’s central bank has moved with a rate hike this month.

Moving ahead, S-REITs are likely facing the sum of all fears: unpredictable and ugly geopolitics, potential energy shocks, supply chain crunch, slowing economic growth, as well as rising inflation and interest rates. 

In such an uncertain environment, potential REIT IPOs could choose to hold back on their plans.

NOT ALL DOOM AND GLOOM?

That said, investors should bear in mind that not all S-REITs are alike. There is a huge divergence in terms of the strength of their balance sheets, quality of assets and earnings, management capability and dividend payout capacity.

The Temasek-backed S-REITs tend to have much stronger balance sheets and diversified portfolios that have resilience against unanticipated market events.

Geopolitical developments and the war in the Middle East might also throw up opportunities for Singapore-listed players. Many could benefit from potential business relocations and fund flows into Singapore, as the situation in the rest of the world and especially erstwhile safe hubs in the Middle East, look increasingly unpredictable.

S-REITs have never shown an inclination to be a high beta play that rallies in tandem with the broader market. But they still offer good yield and stable growth for investors with a strong income focus, given how most are familiar names exposed to relatively safer geographies in Singapore and across the Asia-Pacific region.

As the saying goes, the past is no guarantee of the future but future income streams can be built with patience and foresight. Despite the turbulence of the times, the right S-REIT may still be able to deliver stable long-term yield for the patient investor.

Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for more than 30 years.