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Hi there fellow REIT investors! Welcome back to the channel.

This is a quick but important mid-week update, because we’re now right in the thick of REITs earnings season. And if you ask me, this might just be the most exciting one we’ve seen in a while. Why? It all comes down to one key factor: interest rates.

More specifically — how much are interest rates finally coming down for individual REITs?

If you’ve been following this channel for a while, you’ll know I’ve been tracking this for months. We saw it first in the Singapore T-bill auctions, then in falling SORA rates or the Singapore Overnight Rate Average. And now, we’re starting to see it reflected in actual REIT financials.

Let me walk you through why this matters, what we’ve seen so far, and why I think this could be an essential step — not a guarantee — but a step toward REIT recovery.

Before we start, let me remind you that this post is for informational purposes only and not financial advice. Always do your own research and consult a licensed financial adviser before making any investment decisions. I own some of the REITs discussed, but what works for me might not work for you.

Alright, let’s dive in.

Why Interest Rates Matter So Much to REITs

Let’s take a moment to recap the basics.

REITs are highly geared vehicles. In Singapore, most REITs operate with around 35–40% gearing — which means a big portion of their properties is funded by borrowing. That makes their financial performance very sensitive to interest rates.

When interest rates rise, three things happen:

1. Interest expense increases, which squeezes distribution per unit or DPU to investors.

2. Property valuations drop, because discount rates go up. This causes the gearing of REITs to go up even if the borrowings remain constant.

3. Investor sentiment weakens, as REIT yields look less attractive versus risk-free assets such as T-bill yields.

And that’s exactly what we’ve seen in the past few years — a major downturn in REIT prices, driven largely by rising interest costs.

So now that rates are falling in Singapore and most parts of the world, other than the US? It’s only natural to ask: when will REITs start to benefit?

Well, the answer depends on each REIT’s debt profile — how much of their debt is fixed versus floating, when that debt is maturing, and how strong their negotiation position is with the banks providing the loans.

So when we talk about lower interest rates benefiting REITs, this isn’t just a future possibility — we’re already seeing it on the ground.

For example, Singapore’s 6-month T-bill yield has dropped from close to 4% in 2024 to below 2% recently. 

The 3-month compounded SORA, which many REITs use for floating-rate debt, has also declined from 3.7% to below 1.9% from the start of 2024.

Now, that 1% or 2% drop may not seem massive at first glance… but when REITs are servicing hundreds of millions in debt, the savings quickly add up — and they can have a real impact on what we are most interested in the dividends.

Which brings me to the most exciting part — some REITs have already started showing improvements in their reported interest costs.

Signs of Hope: Some REITs Are Already Showing Lower Interest Rates

So far, a few REITs have released their Q2 2025 results — and we’re finally starting to see that interest rates are coming down. Not across the board, but for most Singapore-focused REITs, many of which are our core portfolio holdings, the trend is very encouraging in my views.

First up, Frasers Centrepoint Trust or FCT, Singapore’s favorite suburban retail REIT focused on heartland malls like Causeway Point and Waterway Point. Its average interest rate fell 0.4 percentage points over a one year period, from 4.1% in Q2 2024 to 3.7% in Q2 2025. With a portfolio occupancy of 99.9%, many analysts are calling it “undervalued”. 

Next is OUE REIT, which holds prime office and hotel assets in largely in Singapore, including One Raffles Place and the Hilton Orchard. Its borrowing cost dropped 0.5 percentage points from 4.7% to 4.2% year on year. This is actually the key reasons some investors are starting to take another look at the REIT. 

The Singapore industrial focused ESR REIT also did quite well, with average interest rates declining 0.5 percentage points from 4.0% to 3.5%. This should continue to boost their recovery momentum this year. 

Finally, Suntec REIT, which owns a mix of office and retail properties largely in Singapore, have their average interest rate declining 0.2 percentage point from 4.02% to 3.82%. This should provide a much needed reprieve for the higher leveraged REIT. 

All four of these REITs have a very high proportion of Singapore-dollar debt, which means they’re benefiting directly from the fall in local interest rates — especially the drop in SORA and T-bill yields.

But over the past week, it hasn’t been good news across the board in terms of interest costs, most of which are more focused overseas, except for one.

Sabana REIT, which owns industrial properties across Singapore, actually saw its cost of debt increase from 4.3% to 4.47%. This could be due to idiosyncratic factors like the ongoing internalisation process or weaker negotiation power with lenders as a result.

Among the others, Mapletree Industrial Trust or MIT, which owns industrial properties in Singapore and data centers in the US and Japan, has a relatively small decline of 0.1 percentage point in their interest rates, from 3.2% to 3.1% over a year. Given that only 18.5% of its debt is SGD, and a massive 64.7% of its debt is in USD, this is perhaps not surprising. In addition, Mapletree Logistics Trust or MLT,  a large-cap logistics REIT with properties across Asia-Pacific — including China, Japan, and Australia, has its interest rate held steady at 2.7%, with no year-on-year change. 

So yes — results are not all favorable. But if you focus on the REITs with predominantly Singapore debt, we’re starting to see the rate relief we’ve all been waiting for, and in my personal views, there might be more to come.

Before going to the final part of the post, if you found this post helpful, do give it a thumbs up so YouTube knows to share it with more investors like you. Alright, back to business. 

The Dividend Uncle’s Take

This mid-week post is really just me sharing some excitement as we go through this REIT earnings season. For months now, I’ve been watching local interest rates trend down — from T-bills to SORA — and wondering: when will we finally see these benefits show up in the REITs themselves?

And now, we’re starting to get a glimpse.

Some of you have rightly pointed out — REIT prices may not fully recover until the US Fed starts cutting rates. That’s true to an extent. After all, global capital flows are still very much anchored to US yields, especially when big investors make allocation decisions.

But here’s what’s also true — when Singapore interest rates decline meaningfully, it does have a direct and measurable impact on REITs here. We’re talking about lower interest expenses, and in turn, higher distributions to unitholders. And that’s the part I’m most looking forward to.

Not every REIT will benefit equally — as we discussed, it depends on their debt structure and refinancing timelines. But as long as this trend continues, I believe we’ll see more encouraging signs in upcoming quarters.

This isn’t a prediction, of course. But to me, it’s a very real and essential prelude to any sustainable REIT recovery. And I’ll be watching the rest of this earnings season with much more optimism than usual.