Reits, institutional investors and funds in ‘buy mode' as debt costs ease

Business Times

24-07-2025

[SINGAPORE] Real estate investment trusts (Reits), investors and funds have turned 'more acquisitive' in Singapore this year, even as geopolitical and macroeconomic uncertainties persist.
Speaking on Thursday (Jul 24) at the annual property market seminar organised by the Real Estate Developers' Association of Singapore (Redas), CBRE deputy managing director of Singapore advisory and capital markets head Michael Tay noted an overall improvement in buying sentiment across the real estate investment market as interest rates eased.
In the year to date, short-term interest rates in Singapore have fallen by 110 basis points, with the 10-year average now standing at 1.3 per cent.
At a separate panel discussion during the Redas event, Taimur Baig, DBS chief economist, said: 'Singapore is going through a golden era in terms of capital flows. It is an overwhelming amount of portfolio and foreign direct investment that's coming to Singapore right now.'
With almost a trillion dollars of foreign current deposit sitting in Singapore, Baig said: 'All that inflow, all the liquidity, materialised into collapsing the domestic interest rate.'
Given the more accretive environment, Tay noted that 'investors are starting to see and feel that it is time to put money back into the Singapore market'.
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Investors are also drawn to the Republic for its safe-haven status and steady yields, even though the market has seen limited repricing, unlike that of South Korea, China and Australia, said Tay. 'Despite tighter yields, Singapore has become a key component for most (institutional investors') portfolios as they balance risks across the portfolio.'
Among Asia-Pacific investment markets, Singapore had the third-highest year-on-year growth in H1 2025, behind Japan and South Korea, said Tay.
Investment activity in the city-state is up 7 per cent year on year, with private volumes up 20 per cent on the year.
Notable deals include Fraser Centrepoint Trust's purchase of the rest of Northpoint City for around S$1.1 billion in March; IOI Properties' acquisition of a 50.1 per cent stake in the mixed-use project South Beach for S$834.2 million in June; and Mapletree Industrial Trust's divestment of three industrial assets for S$535.3 million to Brookfield Asset Management. In April, Bain Capital also acquired Blackstone's Singapore worker dormitory firm Avery Lodge for S$750 million.
CBRE's Investors Intentions Survey in January found Reits, institutional investors and funds signalling more acquisitions in 2025.
Net buying intentions from Reits measured at 22 per cent, up from minus 13 per cent in the prior year. That of institutional investors rose from 4 to 12 per cent, and property funds from minus 4 per cent to 10 per cent.
Meanwhile, private investors were expected to divest more real estate assets, capitalising on improving market sentiment after acquiring them during a period of price dislocation.
Developers were expected to be 'net neutral investors' in the year, with higher construction and labour costs weighing on development decisions, said the report.
The industrial and office sectors were top preferred asset classes, with interest in office assets expected to pick up marginally this year due to stabilising or improving leasing activity in some markets.
The living sector too, received strong interest with a few notable deals closing in the half year. BlackRock and Malaysia's YTL Corp acquired Citadines Raffles Place for S$280 million in May, and a BlackRock-led consortium bought Momentus Serviced Residences Novena for just over S$100 million in the same month.
Earlier in February, an Indonesian tycoon acquired Oakwood Studios Singapore, a freehold serviced apartment block on Mount Elizabeth, for S$152.8 million.
In alternative assets, investors are most keen on data centres, with interest also running high in student housing, CBRE's survey found.
Despite the upswing in activity, Tay warned of growing concerns over trade wars and a potential recession in the next six months.
In Singapore, investors are also worried that interest rate cuts may come slower than expected, he said.
Nonetheless, Tay noted strong fundamentals in Singapore as the benchmark stock market index hit record highs.
'In most cycles, the performance of the equities market is a prelude to confidence and buying interest,' he explained. 'There is normally a price gap of anything from six to 12 months, so we feel positively that with the confidence in the equities market… and (what we see) coming through in the first half of this year, stronger interest will come back into Singapore's real estate market across asset classes.'