Analysts see cautious upside for REITs if rates fall and inflation stays on target

By Beatriz Marie D.  Cruz, Reporter

PHILIPPINE real estate investment trusts (REITs) are expected to become more attractive next year if the central bank delivers another rate cut and if inflation remains within the Bangko Sentral ng Pilipinas’ (BSP) target range, analysts said.

“The outlook for Philippine REITs in 2026 is cautiously constructive, anchored mainly on macroeconomic easing and income stability rather than aggressive capital appreciation,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

He noted that prospects for rate cuts and within-target inflation would make REIT yields more appealing, supporting both valuations and demand from yield-seeking investors.

The BSP delivered its fifth consecutive 25-basis-point (bp) cut at its Dec. 11 meeting, bringing the key policy rate to 4.5%, the lowest in more than three years.

While the central bank said it could be nearing the end of its easing cycle, BSP Governor Eli M. Remolona, Jr. indicated that there is still room for a final 25-bp cut next year, depending on economic developments.

The Monetary Board is scheduled to hold its first meeting of 2026 in February.

Headline inflation in the first 11 months met the central bank’s revised full-year forecast at 1.6%.

Unicapital Securities, Inc. Research Head Wendy B. Estacio-Cruz said economic growth and the expansion of the business process outsourcing (BPO) sector will drive demand for office, retail, industrial, and logistics spaces, which underpin REIT rental income.

“Offices could benefit from BPO expansion, while retail and hospitality from rising domestic tourism, and industrial/logistics properties from electronic commerce and data center demand,” she said in a Viber message.

Philippine gross domestic product (GDP) growth slowed to 4% in the third quarter, the weakest rate in over four years. The BSP expects growth to pick up to 5.4% next year and 6% in 2027.

However, the outlook for REITs is clouded by still-high interest rates, which could reduce valuations and limit dividend growth, Ms. Estacio-Cruz said.

Sector-specific risks, such as vacancy pressures in the office market and increased competition between retail and e-commerce, also pose challenges.

“Market liquidity and valuation conditions in the Philippine stock market are relatively constrained, which can deter issuers and limit investor participation,” she added.

Analysts maintained a cautious outlook for REIT initial public offerings (IPOs) next year.

“Unless the list of REIT-able assets is expanded, a REIT listing for next year is highly unlikely — especially with the most anticipated developer for a REIT listing, SM Prime Holdings, Inc., already expressed pocketing the REIT listing idea,” AP Securities, Inc. Equity Research Analyst Shawn Ray R. Atienza said in a Viber message.

SM Prime earlier ruled out its $1-billion REIT IPO until after 2026 due to unfavorable market conditions.

China Bank Capital Corp. Managing Director Juan Paolo E. Colet projected at least two REITs could enter the stock market next year.

“Upcoming amendments to the REIT rules and lower interest rates could encourage certain sponsors to push through with their REIT IPOs in 2026,” he said in a Viber message.

Last month, the Securities and Exchange Commission said it is updating REIT rules to expand the definition of income-generating assets, extend sponsors’ reinvestment deadlines, and strengthen disclosure and governance requirements.

The revised rules, effective January, are expected to allow more companies beyond traditional real estate to register REITs.

“Regulatory reforms that expand the types of income-producing properties eligible for REITs, including data centers and infrastructure-linked assets, could also widen the pool of potential issuers, creating opportunities for innovative REIT vehicles,” Ms. Estacio-Cruz said.

Currently, the Philippines has eight REITs operating in office, hotel, mall, land, renewable energy, and infrastructure segments.

The country’s REIT portfolio includes AREIT, DDMP REIT, Inc., Filinvest REIT Corp., RL Commercial REIT, Inc., MREIT, Inc., VistaREIT, Inc., Citicore Energy REIT Corp., and Premier Island Power REIT Corp.