Singapore-listed data centre REITs post revenue growth, positive sector outlook for 2026

SINGAPORE – Singapore’s data centre real estate investment trusts (REITs) delivered robust revenue growth in 2025 on the back of AI-driven demand, putting the sector on solid footing for 2026.

But despite the revenue growth, market performance has lagged, with all three pure-play data centre REITs – Keppel DC REIT, Digital Core REIT and NTT DC REIT – largely trading flat.

Analysts expect the sector to remain a growth anchor in digital infrastructure. Many are positive about the future of data centres, with the acceleration of agentic AI expected to increase demand for more sophisticated infrastructure.

A shift from artificial intelligence training to inferencing – where AI models can produce predictions or conclusions – would lead to a growth in edge or near-edge data centres, said Mr Xavier Lee, senior equity analyst at Morningstar. These data centres are located closer to end users or devices, reducing data transit time and latency.

Some governments are also becoming more supportive of AI development.

In Singapore, Prime Minister Lawrence Wong on Feb 12 unveiled in his record $154.7 billion Budget for 2026 a nationwide AI push that would, among other aims, anchor Singapore as a regional AI hub.

This would create a new engine of growth and strengthen the economy’s ability to compete globally while sustaining profitability, long-term expansion and high living standards.

Despite its land constraints, the Republic still sees data centres as a key part of its digital transformation strategy.

But the sector faces numerous headwinds, most notably power constraints which could affect the development of larger data centres designed for heavier workloads.

Rising build costs and macro-financing conditions could also temper short-term sector pricing despite the industry’s strong fundamentals, said Mr Darren Chan, research manager at Phillip Securities Research, while government support and restrictions on data centre development could influence market demand and operators’ cost structures.

Whatever the case, analysts agree that the REITs’ share performance will hinge on distribution per unit (DPU) growth and whether interest rates fall further.

Maybank equity analyst Krishna Guha said the largely flat performance of the three data centre REITs is broadly in line with, or slightly ahead of, the wider Singapore REITs sector, which is down about 2 per cent year to date.

Interest rates are no longer falling as steeply as before, which could be another contributing factor for the REITs’ market performance, he noted.

“DPU growth is mixed and yield spreads are also tight for names like Keppel DC REIT. A combination of higher DPU growth and lower interest rates can be the drivers of better performance.”

Mr Chan said: “REITs remain primarily a yield-focused instrument, and until interest rates decline further, a sharp re-rating is unlikely. Their valuations are largely influenced by the yield spread relative to bonds and other fixed-income assets.”

Keppel DC REIT still undervalued

Mr Lee of Morningstar is positive on Keppel DC REIT, the first data centre REIT to be listed on the Singapore Exchange (SGX) in 2014.

The REIT posted $230.1 million in revenue for the second half of the financial year ended Dec 31, 2025, up 50.3 per cent from a year ago.

DPU for the second half of 2025, which rose 7.1 per cent to 5.2 cents, will be paid out on March 19, the REIT’s manager said on Jan 30.

Its net property income (NPI) for the second half of 2025 grew 57 per cent to $200.4 million, with the full year amounting to $383.3 million.

Total revenue for the full fiscal year was up 42.2 per cent at $441.4 million, while its DPU rose 9.8 per cent year on year to 10.4 cents.

Keppel DC REIT attributed its growth to the acquisition of four data centres in Singapore and Japan amounting to $1.1 billion, as well as higher contributions from contract renewals and rising rental rates.

This was partially offset by the divestments of Intellicentre Campus in Australia and Kelsterbach Data Centre in Germany, as well as the absence of a one-off dispute settlement sum received in 2024.

With the completed acquisitions, Keppel DC REIT now has 25 data centres across 10 countries in its portfolio. It said it is on track to divest its Malaysia data centre as well as complete the proposed sale of M1-issued NetCo bonds and preference shares in 2026 following the parent company’s sale of the telecommunications business to rival Simba. This would unlock around $163.4 million, which would be redeployed into higher-yielding investments.

Yet, Keppel DC REIT’s unit price has been relatively range-bound despite its revenue growth, with units of the REIT closing the week 0.9 per cent higher at $2.27 on Feb 20.

Mr Lee said the REIT’s muted performance may stem from valuations already capturing the growth outlook. It is trading at around 1.3 times price-to-book, indicating that near-term earnings accretion has largely been priced in.

“Investors may also be cautious over potential equity fund-raising, given the REIT’s acquisition-driven strategy. Expectations of future capital needs may weigh on sentiment despite improving fundamentals.”

In his view, though, Keppel DC REIT units are still undervalued, “supported by an attractive yield distribution forecast of 4.9 per cent in 2026”.

Softer performance for Digital Core REIT, NTT DC REIT

The other data centre REIT that has grown its portfolio through acquisitions is Digital Core REIT.

The manager of Digital Core REIT declared on Feb 4 a DPU of 1.8 US cents (2.28 Singapore cents) for the second half of the 2025 financial year ended Dec 31, unchanged from the year-ago period.

Total DPU for the full fiscal year was also unchanged from the previous year at 3.6 US cents.

This was despite revenue for the second half of 2025 increasing 61.6 per cent to US$87.3 million, while total revenue for the fiscal year grew 72.2 per cent to US$176.2 million.

While its property expenses for the fiscal year doubled to US$87.4 million, NPI still grew 43.5 per cent to US$88.7 million.

Digital Core REIT, which listed on SGX in 2021, has 11 data centres across the United States, Canada, Germany and Japan. Its manager said its portfolio occupancy remained unchanged at 97 per cent in 2025.

In March 2025, it acquired a 20 per cent stake in a second fully fitted freehold data centre in Osaka from Mitsubishi Corp for 13 billion yen (S$106.2 million), which is expected to be 1.8 per cent accretive to its DPU.

On Jan 5, it announced it had reached a 10-year agreement with an investment-grade global cloud service provider to occupy the entire Linton Hall facility in Virginia. As at Dec 31, 2025, its occupancy had grown from 81 per cent to 98 per cent.

The agreement will start on Dec 1 and is expected to generate around US$14.8 million in NPI annually.

Units of Digital Core REIT closed the week flat at 52.5 US cents on Feb 20.

NTT DC REIT, which listed in Singapore in July 2025, performed less strongly.

It recorded US$106 million in revenue – 1.7 per cent higher than its initial public offering forecast – in its nine-month business update for the year ended Dec 31, 2025.

Its NPI fell short of its forecast by 0.6 per cent at US$47.1 million, while its portfolio occupancy also dropped from 95.1 per cent in the third quarter of 2025 to 94.6 per cent, though its manager said its committed occupancy since the third quarter stands at 97.3 per cent. Rental reversion increased 9.2 per cent.

Units of NTT DC REIT closed the week flat at 99.5 US cents on Feb 20.

Data centres have become prized assets in the REITs market in recent years, as managers seek higher-yielding properties to grow their portfolios while maintaining asset-light structures.

Beyond pure-play data centre REITs such as Keppel DC REIT, Digital Core REIT and NTT DC REIT, several mainboard-listed REITs also hold data centre assets as part of diversified real estate portfolios.

These include Mapletree Industrial Trust, which has 59 data centres mostly in the US, and CapitaLand Ascendas REIT, which acquired a data centre in Tai Seng in 2025 for $275.5 million and announced in February its plans to redevelop its data centre in Tampines.

Investors may also get exposure to data centres through blue-chip stocks like Singtel and ST Engineering.