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Singapore Office REITs: Interest Rate Easing Cycle Provides Earnings and DPU Upside
SUMMARY
- The interest rate cycle in Singapore typically correlates with the Fed. According to June’s FOMC Summary of Economic Projections, based on median estimates, the Fed is expected to cut interest rates by 50bps (in two rate cuts) for the rest of 2025, with 25bps more (in one rate cut) in 2026.
- Based on latest futures from CME Group, the market is pricing in a 89% probability of rate cut during the Fed's next meeting in September.
- The current easing cycle is a clear sector tailwind. The steep decline in 3M Singapore’s SORA from 3.03% in January to 1.85% in August, will benefit the sector in multiple perspectives: reduced funding cost, more stable cap rates to support asset valuations, as well as more attractive REIT valuation on the back of yield spreads.
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