SINGAPORE’S real estate investment trusts (Reits), once a shining star in the stock market, are now in dire need of a revival and reform. Previously, in the decade following the Global Financial Crisis and before Covid-19, Singapore Reits consistently outperformed the Straits Times Index (STI). However, recent trends have seen property trusts plummet, while the STI remains stagnant since its peak in April 2022.

Post-pandemic factors, including rising interest rates and the global shift to remote work, have dampened investor confidence. Although the easing of US Federal Reserve policies may offer some relief, the governance of Singapore Reits could hinder a full recovery, making reforms essential.

The struggles in the US office market are echoing in Singapore. For instance, Digital Core Reit, which focuses on data centers in the US and Canada, has seen its unit prices drop to less than half of their early 2022 values. After facing scrutiny regarding a key tenant’s declining financial health, the Reit’s management offered vague responses, raising concerns about transparency. Following the bankruptcy of Cyxtera Technologies, a significant client, the Reit’s situation worsened. The eventual sale of properties did not alleviate the demand for better disclosures from the Singapore Exchange (SGX).

To restore investor trust, SGX must level the playing field, currently skewed in favor of sponsors—companies that establish Reits by pooling properties for collective ownership. A landmark victory occurred in August 2023 when Quarz Capital Management successfully removed the external manager of Sabana Industrial Real Estate Investment Trust, a move that could lead to a shift toward more internal management of Reits in Singapore.

Despite this progress, the timeline for implementing changes remains unclear, with legal expenses already exceeding S$3 million for a trust holding just S$1 billion in assets. The lack of clarity around legal procedures has stalled necessary reforms, as SGX RegCo and the high court have differing opinions on critical processes.

In comparative terms, Singapore Reits appear robust, as shown by S&P Global Ratings’ stress tests indicating their credit ratings outperform those of their counterparts in China, Hong Kong, Japan, and Australia. While the office market does need a new influx of tenants, Singapore is not facing an imminent crisis—only uncertainty regarding the demand for space.

In a city where real estate is highly valued, apartment owners might be hesitant to overlook Reits offering returns of 5 to 8 percent when they are satisfied with lower yields. Now is the critical moment for reforms aimed at diminishing sponsor dominance and empowering unit holders. With activist investors pushing for change and the judiciary playing its part, the responsibility now lies with regulators to ensure a balanced and thriving Reit market.