The expected interest rate cuts this month may provide relief for real estate investment trusts (REITs) after a turbulent few years for the sector.
For context, the US Federal Reserve hiked interest rates sharply in 2022 and 2023.
And while the US central bank started cutting rates in late 2024, interest rates have remained unchanged for 2025 so far.
That’s about to change.
Singapore REITs stand to benefit from lower interest rates as financing costs will ease and yield spreads widen against government bonds.
For those looking to invest in Singapore REITs, here is a look at three Singapore REITs that could benefit the most from the upcoming rate cuts.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, holds a portfolio of logistics and commercial properties across Singapore, Australia, Germany, the UK, and the Netherlands.
The trust has struggled recently as financing expenses increased with borrowing costs rising to 3.2% for the third quarter of the financial year ending 30 September 2025 (3QFY2025), up from 2.8% a year ago.
An interest rate cut could ease FLCT’s debt servicing pressure, help stabilise its distribution per unit (DPU), and allow investors to enjoy steadier, or even higher, dividends.
Meanwhile, FLCT is also struggling from low occupancy for its commercial buildings.
For the latest quarter, the REIT reported 85.1% occupancy for commercial buildings, a far cry from the 96.1% occupancy recorded by its logistics and industrial properties.
Lower interest rates could spur economic growth and demand for office space.
At S$0.95, FLCT offers a distribution yield of 6.7%.
Keppel REIT (SGX: K71U)
With a focus on prime properties mainly in Singapore’s central business district (CBD), Keppel REIT is another S-REIT that can stand to benefit from interest rate cuts.
Lower rates will not only ease financing costs for Keppel REIT, but also support higher asset valuations, thereby improving its gearing ratio and interest coverage ratio.
Keppel REIT’s aggregate leverage is on the wrong side of 40% while its interest coverage ratio (ICR) is relatively low at 2.6.
With lower interest rates, the trust could benefit from a higher ICR.
Meanwhile, Keppel REIT’s cost of debt remains at 3.5%, relatively unchanged from the previous quarter.
That said, Keppel’s REIT’s DPU fell 2.9% year on year for the first half of 2025.
Analysts attributed this decline to management opting to receive 25% of its fees in cash and 75% in units instead of 100% in units in the past.
The trust saw a high committed occupancy rate for its North Asia portfolio at 98.7%, but occupancy rates for its Australia portfolio at 93.9% last quarter (2Q 2025) could be better.
At S$1.01, Keppel REIT offers a distribution yield of 5.5%.
Mapletree Pan Asia Commercial Trust (SGX: N2IU)
Mapletree Pan Asia Commercial Trust (MPACT) (SGX: N2IU) was formed by the merger of Mapletree Commercial Trust and Mapletree North Asia Commercial Trust in July 2022.
The REIT holds a diversified portfolio of business parks, office, and retail malls across Singapore, Hong Kong, China, Japan, and South Korea.
Overall, MPACT is showing signs of improvement with its cost of borrowing declining from 3.54% on 30 June 2024 to 3.32% as of 30 June this year. The REIT’s leverage ratio also improved from 40.5% to 37.9% over the same period.
That said, ICR remains fairly low at 2.9 times.
Lower interest rates, in this case, will help boost the trust’s ICR.
Meanwhile, the trust saw a 3.8% year-on-year decline in its first quarter fiscal 2026 DPU due to negative contributions from its overseas assets.
China and Japan’s property occupancy remains challenged, falling year on year.
Despite challenges in its overseas portfolio, MPACT’s Singapore and Hong Kong assets like VivoCity and Festival Walk maintain high occupancy rates, giving the trust a bit more stability.
The trust is divesting two Japanese assets as part of its portfolio optimisation strategy to focus on Singapore as a core market.
At S$1.42, the REIT offers a 5.6% distribution yield.
Get Smart: Interest Rate Cuts Help, But Fundamentals Drive Returns
With the interest rate cuts expected this month, not all REITs will benefit equally.
Frasers Logistics & Commercial Trust, Keppel REIT, and Mapletree Pan Asia Commercial Trust may be well positioned to gain from the interest rate cuts due to a variety of reasons, from an improving gearing ratio to strong interest coverage, and better managed debt maturity profiles.
To evaluate which REITs you could potentially benefit from, it is important to look past the headline yields and assess the trusts’ fundamentals, such as balance sheet strength, cost of debt, and quality of the REITs’ assets.
Disclosure: Rachel owns shares of Frasers Logistics & Commercial Trust.
