On 17th September 2025, the U.S. Federal Reserve delivered its first interest rate cut of the year, trimming the benchmark rate by 25 basis points to a range of 4.00% to 4.25%. This move, framed as a “risk management” response to softening employment data, marks a pivotal moment for global markets and especially for Singapore real estate investment trusts (REITs), which are poised to benefit from the shift in monetary policy.
Singapore REITs have long been sensitive to interest rate cycles, given their reliance on debt financing and their appeal as yield-generating instruments. When rates rise, borrowing costs increase and REIT valuations typically come under pressure. Conversely, falling interest rates reduce financing expenses and enhance the relative attractiveness of REIT distributions compared to fixed-income alternatives. With the Fed signalling two more cuts by year-end, the tide is turning in favour of S-REITs.
Already, the effects are rippling through Singapore’s financial landscape. The Singapore Overnight Rate Average (SORA) which is a key benchmark for local lending has dropped significantly throughout 2025, driven by safe-haven capital inflows and abundant domestic liquidity. This decline has translated into lower financing costs for REITs. For instance, Keppel DC REIT and OUE REIT reported year-on-year reductions in finance costs of 5.3% and 17.3% respectively in the first half of 2025. Digital Core REIT also saw its average cost of debt fall from 3.8% in Q1 to 3.4% in Q2.
Lower interest rates are not just easing the pressure on debt servicing they are also reviving investor appetite for yield. With fixed deposit rates in Singapore moderating to around 1.5% from their 2022 to 2023 peak of 2.5% to 3%, REITs offer a compelling alternative. CapitaLand Integrated Commercial Trust (CICT), for example, increased its distribution per unit by 3.5% year-on-year in 1H2025, underscoring its resilience and income-generating potential.
The rate cut also comes at a time when Singapore’s property fundamentals are stabilizing. Office vacancy rates in prime areas have declined, retail rents are recovering amid rising tourist arrivals, and new supply remains below historical averages. These tailwinds, combined with cheaper financing, create a favourable environment for REITs to refinance debt, pursue acquisitions, and grow distributions.
However, not all REITs will benefit equally. Those with high leverage or significant overseas exposure may face slower recovery, especially if regional currencies remain weak or refinancing risks persist. Investors should remain selective, focusing on REITs with strong balance sheets, high occupancy rates, and exposure to resilient sectors like retail and commercial office space in Singapore.
In summary, the Fed’s September 2025 rate cut is a welcome catalyst for Singapore REITs. As borrowing costs decline and yield spreads widen, REITs are regaining their shine in a low-rate environment. For investors seeking stable income and long-term growth, this could be the beginning of a renewed REIT rally one that rewards strategic positioning and sector insight.
It is also time to look at the list of Singapore REITs to Buy in September 2025.