With Vietnam facing a 46% tariff, exporters may reroute through Singapore, boosting its transhipment and air freight volumes
by IFAST RESEARCH TEAM
A LEVERAGED sector like Singapore-listed Real Estate Investment Trusts (S-REITs) is expected to remain volatile this year, fuelled by trade tensions which would keep rates higher for longer. Our top sector picks are industrial/logistics and data centres. While we see opportunities in these segments, investors should remain selective, prioritising S-REITs with resilient balance sheets and the ability to capture structural tailwinds.
Industrial and Logistics S-REITs
In 2024, vacancy rates for Singapore warehouses fell from 8.9% at the start of the year to 8.5% in the fourth quarter of 2024 (4Q24). This led to a 1.4% year-on-year (YoY) growth in gross rent. Moreover, among other industrial properties, warehouses continued to lead the growth in the broader industrial property rental index on a quarter-on-quarter (QoQ) basis.
Fast forward to 2025, the imposition of new tariffs by the US, including a 10% levy on Singapore exports, has reignited concerns about the impact of rising trade protectionism on global supply chains. Yet, Singapore’s logistics sector, a cornerstone of its export-driven economy, should be resilient.
Singapore’s direct export exposure to the US remains relatively modest, at around 13% (10-year average: 11%) of total exports for the first two months of this year. While US-bound trade may take a slight hit, the impact is likely to be less severe than that experienced by regional peers such as Vietnam, Malaysia or Indonesia.
This comparatively lighter tariff burden makes Singapore’s exports more cost-competitive, which may position the country as a stable and reliable trade partner in the eyes of US buyers.
Moreover, Singapore may emerge as a rerouting hub. Previously, Chinese goods were often rerouted through Vietnam before being shipped to the US. However, with Vietnam now subject to a steep 46% tariff, exporters may look to Singapore as a rerouting hub. This rerouting could result in increased transhipment volumes through Singapore’s ports and air freight infrastructure, offsetting declines in direct exports.
Additionally, as businesses reassess their global supply chains in light of rising geopolitical and trade tensions, Singapore stands to benefit from its reputation for stability, transparency and robust infrastructure. For instance, firms looking to diversify away from more heavily tariffed markets may view Singapore as an attractive alternative — not just for transhipment, but also as a base for value-added logistics services, light manufacturing, and regional distribution.
This repositioning could lead to:
- Increased demand for logistics warehousing.
- Higher amount of goods passing through (throughput) in free trade zones.
- More investment in smart logistics and supply chain technologies.
Despite the macroeconomic uncertainty, Singapore’s logistics ecosystem remains agile:
- The Port of Singapore continues to rank among the world’s busiest.
- Changi Airport is expanding its air cargo capabilities.
- The full completion of Tuas Megaport (targeted 2040s) will cement Singapore’s status as a global shipping and logistics powerhouse.
Additionally, Singapore’s participation in multilateral trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP) further strengthens its connectivity and trade resilience.
In short, while US tariffs pose risks to global trade, Singapore’s logistics sector is well-positioned to weather the storm. The combination of lower tariff exposure, strategic location and growing relevance in supply chain diversification means the sector may not only withstand the current wave of protectionism but also find opportunities within it.
As global manufacturers and buyers pivot toward more stable, transparent, and strategically located hubs, Singapore is likely to emerge as a critical node in the next era of global trade. Hence, we see higher occupancy rates and greater rental reversions for S-REITs with exposure to industrial/logistics assets.
Data Centre S-REITs
Another sector poised to continue to experience significant growth is data centre S-REITs. This is especially so with the increasing adoption of artificial intelligence (AI) and cloud computing. AI applications such as ChatGPT and autonomous technology, require high-density computing which could lead to higher power requirements per rack. Moreover, DeepSeek has highlighted the rapid pace of AI innovation which could enhance cost-efficiency in training new AI models and, in turn, accelerate AI adoption.
Singapore’s hyperscaler data centre market is projected to grow significantly at a compound annual growth rate (CAGR) of 11.3% — from US$639.51 million in 2023 to US$1.7 billion (RM7.43 billion) by 2032 — driven by sustained demand from major tech firms like Alphabet Inc, Microsoft Corp and Amazon.com Inc, which maintain regional headquarters here.
Despite strong demand, data centre supply in Singapore remains limited due to land and regulatory constraints, including a moratorium on new data centres to manage energy consumption. New data centres must now meet stringent energy efficiency standards before construction.
This has prompted data centre-focused S-REITs to expand into overseas markets such as North America, Europe and Japan. For example, Mapletree Industrial Trust acquired data centre assets in Osaka and Tokyo in 2023-2024. Globally, data centre capacity is projected to grow 15% annually from 2023 to 2027, still falling short of demand.
As sustainability becomes increasingly important, environmental, social and governance (ESG)-compliant, energy-efficient data centre will be a key focus area. S-REITs like Keppel DC REIT are already aligning with this trend — its recent full acquisition of Keppel Data Centre Campus in Singapore includes infrastructure designed to reduce energy and water usage, reflecting a broader industry push toward green data centre operation.
Risks to Monitor
- Inflation: With the ongoing trade policy uncertainties, inflation risk is likely to remain high. This could suggest high-for-longer rates which could continue to weigh further on this leveraged sector.
- Geopolitical tensions: Disruptions in global trade routes (eg, Red Sea tensions) may impact logistics and supply chains.
- Weak economic growth: Expectations of slower global economic growth brought about by US President Donald Trump’s trade policies could impact demand across sectors. For instance, discretionary retail spending could weaken, thereby slowing the demand for goods, which may impact logistics S-REITs.
Logistics S-REITs stand to remain resilient in light of US trade tariffs and global trade tensions, while data centre S-REITs will see strong AI-driven demand despite the power and regulatory constraints.
That said, investors should remain watchful of trade policy uncertainties, geopolitical risks and consumer spending trends, which could further increase volatility. With the ongoing trade tensions, we expect further volatility in this sector this year.
A selective approach will be key — we recommend investors to focus on well-managed S-REITs with resilient balance sheets and the capability to capitalise on structural tailwinds.
The views expressed are of the research team and do not necessarily reflect the stand of the newspaper’s owners and editorial board.
- The views expressed are of the research team and do not necessarily reflect the stand of the newspaper’s owners and editorial board.
- This article first appeared in The Malaysian Reserve weekly print edition
The post Singapore REITs outlook: Selectivity is key appeared first on The Malaysian Reserve.
