Larger S-Reits Attract Retail Investors in 2024

In 2024, larger S-Reits (Singapore Real Estate Investment Trusts) have emerged as popular choices among retail investors, with several factors contributing to their higher net retail inflows. This article explores the reasons behind this trend and examines the performance of these S-Reits compared to the broader market.



Factors Attracting Retail Investors to Larger S-Reits

1. Stability and Diversification: Larger S-Reits often have more diversified portfolios, which can provide a sense of security and stability to retail investors. For instance, Mapletree Logistics Trust (MLT) and CapitaLand Ascendas REIT (CLAR), two of the largest S-Reits, have diversified portfolios across various sectors and geographies, which can help mitigate risks.
2. Strong Performance History: Larger S-Reits typically have a proven track record of strong performance. For example, MLT and CLAR have consistently delivered positive rental reversions and stable occupancy rates across their portfolios. This historical performance can attract retail investors seeking reliable returns.
3. Brand Recognition: Larger S-Reits often have well-established brands and reputations in the market. Retail investors may be more comfortable investing in familiar names, as seen with the seven S-Reits on the Straits Times Index (STI) and CapitaLand Ascott Trust and Keppel REIT, which are on the STI Reserve list.
4. Liquidity: Larger S-Reits tend to have higher trading volumes, which can provide better liquidity for retail investors looking to enter or exit positions easily.
5. Dividend Yield: Larger S-Reits often offer attractive dividend yields, which can be appealing to retail investors seeking income. As of 10 January 2025, the iEdge S-REIT index trades at an estimated dividend yield of 6.5%, above its five-year average of 6.0%.
6. Portfolio Rejuvenation Strategies: Larger S-Reits may have more resources to implement portfolio rejuvenation strategies, such as accretive acquisitions, strategic asset enhancements, and selective divestments. These strategies can help improve the overall quality of the portfolio and attract retail investors.

Performance of Larger S-Reits in 2024

In 2024, the performance of S-Reits was volatile as market participants weighed the path of inflation and interest rates. The iEdge S-REIT Index generated a total return of -6.1 per cent inclusive of distributions, indicating a decline in the sector. However, the sector delivered one of its best quarterly performances on record in Q3 2024 on the back of the US Federal Reserve cutting interest rates for the first time in four years. But optimism dipped in the fourth quarter as market participants closely monitored inflation indicators.

Retail investors were net buyers of S-Reits in Q1, Q2, and Q4 of 2024, which corresponds with periods where the overall sector saw price declines. The strongest retail buying came during Q4 – when the iEdge S-REIT index fell 10.5 per cent – with over S$750 million in net inflows. On the other hand, retail investors were net sellers in Q3 2024, where they capitalised on the upswing in prices.

For the full year, the S-Reits with the highest net retail inflows were mostly large counters. All seven S-Reits on the Straits Times Index (STI) saw positive net retail inflows, while CapitaLand Ascott Trust and Keppel REIT, which are currently on the STI Reserve list, also ranked among the top 10. Mapletree Logistics Trust (MLT) and CapitaLand Ascendas REIT (CLAR) led in terms of retail net buying, with S$336.0 million and S$282.6 million of net inflows respectively. These counters also ranked among the top five for net retail inflows across the broader Singapore market.

Institutional investors were net sellers of S-Reits, with S$1.6 billion in net outflows in 2024. The S-Reits that saw the highest net retail selling in 2024 were Keppel DC REIT and Suntec REIT – both of which are also on the STI Reserve list – with S$51.7 million and S$124.2 million in net outflows respectively.

Conclusion

Larger S-Reits have attracted retail investors in 2024 due to their stability, strong performance history, brand recognition, liquidity, dividend yield, and portfolio rejuvenation strategies. Despite the volatile performance of the S-REIT sector in 2024, retail investors were net buyers during periods of price declines, indicating that they were opportunistically adding to their portfolios. The strong net retail inflows for larger S-Reits demonstrate the attractiveness of these investments to retail investors, even in a challenging market environment.