Did you know that income-focused investors can also gain some exposure to the secular growth trends of AI and digitalisation, without compromising on receiving consistent income?
Singapore investors can consider two SGX-listed REITs that provide exposure to data centres while offering decent income potential: Keppel DC REIT (SGX: AJBU), or KDCREIT, and Digital Core REIT (SGX: DCRU), or DCRU.
In this article, we look at which REIT offers the better buy today.
Why Data Centres Are the New “Digital Gold”
Globally, there has been a surge in demand for data centres as the indispensable backbone of the modern digital economy, with Singapore not an exception to this trend.
This is fuelled by an insatiable appetite for AI workloads, cloud computing and massive data storage and processing needs.
Importantly, this isn’t a temporary spike; it’s a long-term structural shift.
Furthermore, data centres are capital-intensive and highly specialised, which results in high barriers to entry, offering some protection to their owners.
Business Overview: Keppel DC REIT vs Digital Core REIT
Let’s now examine the differences between the two REITs.
KDCREIT is primarily known for its Singapore-focused data centre portfolio, with a steady presence in Japan, paired with a selective exposure in Europe.
Its assets are generally of high-quality, anchored by solid, blue-chip tenants.
KDCREIT currently trades near S$2.30 per unit.
With its latest 2025 distribution per unit (DPU) of S$0.1038, KDCREIT offers an annualised yield of 4.5%.
As of the first quarter ending 31 March 2026 (1Q2026), revenue and net property income (NPI) have grown at decent double-digit rates of 18.4% and 19.4%, to S$121.0 million and S$105.2 million respectively.
Leverage is low at 35.1%, with a strong trailing twelve-month (TTM) interest coverage ratio of 7.2x.
KDCREIT has a low borrowing cost of 2.6%, with a well-managed debt tenor stretching to 3.3 years, leaving the REIT light on refinancing needs.
On the other hand, DCRU’s operations mainly span across the US, with data centres in Canada, Europe, and Japan.
This American-focused REIT currently trades at US$0.50.
With the full year ending 31 December 2025 (FY2025) DPU at US$0.036, this translates to an enticing current yield of 7.2%.
For its first quarter ending 31 March 2026 (1Q2026), DCRU saw stable revenue of US$44.1 million, while NPI declined 4.9% on an annual basis to US$21.3 million.
The REIT’s balance sheet remains decent, with an aggregate leverage of 39% and an interest coverage ratio of 3.3x.
Cost of debt of 3.5%, alongside a weighted average debt maturity of 3.5 years, suggests light refinancing needs.
Portfolio Comparison
As of 31 March 2026, KDCREIT has 25 data centres across 10 countries.
Singapore, followed by Europe and Japan, contributes the bulk of its exposure (91.6% of assets under management).
The REIT’s tenant mix is mainly made up of internet enterprise customers (69.6%), with a high occupancy rate of 95.6%.
However, do note its client concentration risk: its top client, a Fortune Global 500 hyperscaler, accounted for 42.8% of 1Q2026 rental income, while the top 10 clients together made up around 83.5%.
KDCREIT has a decently long income visibility, with a weighted average lease expiry (WALE) of 6.5 years.
Meanwhile, DCRU has a smaller portfolio of 11 data centres – 10 in service and one (Linton Hall, in Virginia) under redevelopment – of which seven are located in the US.
Over 50% of its rental income is derived from three companies, with its tenant mix consisting of 60% hyperscalers, 34% colocation/IT service providers, and 6% social media and other.
Occupancy rate is strong at 97%, with a WALE of 4.4 years providing decent income visibility.
KDCREIT’s more diversified portfolio of data centres strengthens its income resilience compared to DCRU, though both names may face concentration risks.
Future growth drivers underpinning both REITs include their ability to leverage their sponsors’ pipelines to acquire new accretive data centres.
Furthermore, watch out for higher rental reversions, alongside asset enhancement initiatives which could strengthen both REITs’ NPI and occupancy rates.
Distribution Comparison: Income vs Scale Trade-Off
KDCREIT is the heavyweight gorilla of the two, offering stronger income visibility (due to its broad portfolio) and greater geographic diversification compared to DCRU.
However, this comes at a cost of a lower yield of 4.5% compared to DCRU’s 7.2%.
Conversely, DCRU offers potential for greater growth given the upcoming completion of its Linton Hall redevelopment and management’s proactive unit buybacks.
Hence, KDCREIT represents the safer option for income-focused investors, while DCRU offers greater capital appreciation potential and a higher yield at the cost of a smaller data centre portfolio.
Key Risks Investors Should Watch
Key risks surrounding both REITs include higher interest rates, which would increase borrowing costs and hamper DPU.
Additionally, their heavy reliance on a few key customers presents a concentration risk.
Furthermore, state-of-the-art data centres are continuously undergoing upgrades, which could result in obsolescence for both REITs.
Valuation: Which Looks More Attractive?
KDCREIT trades at a more demanding last twelve months (LTM) price-to-book (P/B) of 1.4x compared to DCRU’s 0.6x.
The current 4.5% yield offered by KDCREIT slightly trails its five-year average of 4.7%. DCRU’s 7.2% yield is significantly higher than the yields presented since its first distribution in 2022.
Overall, it does not seem that the market has overly priced in the growth potential of data centres, while showing a clear preference for scale (seen in KDCREIT’s lower yield).
Get Smart: High-Growth Potential vs. Blue-Chip Stability
For investors seeking exposure to the data centre trend, they have to consider the portfolio quality, financial position, and income resilience to determine the right REIT to include in their portfolios.
For income-focused investors, KDCREIT presents a compelling option for a stable distribution payer.
For investors looking for more growth, DCRU is the ideal pick for your portfolio.
It all comes down to your investment horizon and what you favour more as an investor: growth or income.
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Disclosure: Wilson.H does not own shares in any of the companies mentioned.
