Overall: We maintain a cautiously optimistic view on Asian REITs, supported by falling interest rates across Asia ex-Japan, which enable lower financing costs and open the door for accretive acquisitions. Singapore exemplifies this trend, with Capitaland Ascendas acquiring assets at attractive cap rates using low-cost debt and equity raised at a premium to NAV.
Regional Highlights:
- Japan: JREITs have outperformed equities in 2025 despite rising bond yields, driven by wide valuation discounts and buybacks. While refinancing at higher rates is a headwind, rental growth from expiring COVID-era leases and strong fundamentals in office, hotel, and urban retail sectors provide earnings support. JREITs are preferred over developers at this stage.
- Australia: Ex-Goodman, REITs have rallied with names like Charter Hall and Mirvac seeing strong gains. Valuations are now full in some names, prompting rotation to undervalued plays like National Storage REIT, which may benefit from consolidation trends and takeover potential. Exposure to Australia has been trimmed in favor of better value in Singapore.
- Hong Kong: Ultra-low HIBOR levels and recovering residential demand support REITs and Developers, particularly those with floating rate debt. Retail REITs benefit from stabilizing sales and moderating outbound travel. Link REIT and Fortune REIT may gain from Stock Connect inclusion. Caution remains for the oversupplied Central office market.
- Singapore: Large-cap SREITs (CICT, CLAR, Frasers Centrepoint) offer compelling relative value. Despite rate cuts, sector underperformance persists, but the high yield spread over rates is expected to attract rotation from banks. Accretive acquisition pipelines and potential growth in data centers and healthcare assets add upside.
