The REITsavvy 2024 Annual Review

Singapore REITs in 2024: Navigating a Challenging Landscape

The year 2024 presented a challenging landscape for S-REITs, despite the Federal Reserve's efforts to stimulate the economy through a series of rate cuts. While a total of 100 basis points were cut throughout the year, beginning in September 2024, the positive impact on S-REITs remained elusive.

A Year of Declining Returns

The year witnessed a continuation of the downward trend in S-REITs returns observed in 2023. A significant portion of S-REITs experienced negative returns, with a concerning number (11 S-REITs) recording losses exceeding 10% in total returns inclusive of dividend payout. This highlights the persistent headwinds facing the sector despite the accommodative monetary policy.

While the 100 basis point rate cut aimed to lower borrowing costs and boost economic activity, its impact on S-REITs was muted.

Several factors likely contributed to this muted response:

• Lingering Concerns: The lingering effects of the previous period of rising interest rates continued to weigh heavily on REIT valuations.
• Economic Uncertainty: The global economic outlook remained uncertain, with concerns surrounding inflation and potential recessionary pressures. This uncertainty translated into subdued investor sentiment and cautious investment decisions.
• Sector-Specific Challenges: Individual REIT sectors faced unique challenges. For instance, the office sector contended with the potential impact of remote work on demand for office space.

Looking Ahead: Potential for Improvement?

2024 presented a challenging year for S-REITs, with declining returns and persistent headwinds despite the Federal Reserve's rate cuts. However, the potential for further rate cuts and the focus on high-quality S-REITs may offer some opportunities for investors in the coming months.

• Lower Borrowing Costs: Continued rate cuts in 2025 are anticipated, which could significantly benefit S-REITs by reducing their borrowing costs and enhancing profitability.
• Focus on Quality: As the market evolves, investors are likely to increasingly favour S-REITs with strong fundamentals. These include high-quality assets, stable tenant profiles, and experienced management teams.
• Value Opportunities: The current market environment may present attractive valuation opportunities for discerning investors. Some S-REITs may be trading at prices that do not fully reflect their underlying value and growth potential.