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- HLIB said from 4Q2025 onwards, REITs with recently completed acquisitions should see stronger contributions.
KUALA LUMPUR (Dec 16): Malaysian retail and hospitality-focused real estate investment trusts (REITs) are expected to be boosted by enhanced portfolios beyond the seasonal uplift in the fourth quarter (4Q2025), driven by year-end festivities and school holidays.
"Looking ahead, we expect sector earnings to be underpinned by company-specific strategies such as asset injections, tenant remixing, and improving occupancies," said Hong Leong Investment Bank (HLIB) in a note on Tuesday.
HLIB said from 4Q2025 onwards, REITs with recently completed acquisitions should see stronger contributions.
More specifically, it said IGB REIT's (KL:IGBREIT) earnings will be supported by the injection of Mid Valley Southkey completed in November.
Several near-term acquisition pipelines are worth monitoring, including Paradigm REIT's (KL:PARADIGM) plans to inject Hyatt Place Johor Bahru Paradigm Mall, Le Méridien Petaling Jaya, and Premier Hotel Klang valued at around RM500 million and targeted for the second half of 2026.
AmanahRaya REIT (KL:ARREIT), meanwhile, acquired an industrial building in Telok Panglima Garang, Selangor, for RM39 million.
HLIB also noted that UOA REIT (KL:UOAREIT) had announced plans to acquire Tower 2A, Tower 2B, and a car park facility at UOA Business Park in Glenmarie, Shah Alam, for a total purchase consideration of RM200 million.
The research house added that the positive tourism outlook and the Visit Malaysia 2026 campaign should further support footfall, tenant sales and hotel performance, particularly for Pavilion REIT (KL:PAVREIT), KLCC Stapled Group (KL:KLCC) and Sunway REIT (KL:SUNREIT).
Overall, REITs delivered stable earnings and showed strengthening fundamentals in 3Q2025, supported by improving occupancies and firmer rental performance, according to HLIB.
HLIB highlighted that the sector is trading near a +1 standard deviation yield spread above its five-year average, driven by a more than 30-basis-point year-to-date decline in 10-year Malaysian Government Securities yields.
Sunway REIT's hotel occupancy climbed to 76% in 3Q2025, supported by higher average daily rates. This drove an 11.8% quarter-on-quarter increase in hotel revenue, its highest since listing, on strong meeting, incentive, conference and exhibition demand, the research house noted.
Quarter-on-quarter (q-o-q) earnings across the sector were largely flat due to limited seasonality in the office and industrial segments and the non-festive retail period.
Separately, Pavilion REIT stood out, posting a 6.8% q-o-q increase on a full-quarter contribution from Banyan Tree Kuala Lumpur and Pavilion Hotel Kuala Lumpur.
HLIB said there were signs of a gradual recovery in the office segment, with higher occupancies and sustained positive rental reversions reported across most REITs despite the continued oversupply in the Klang Valley.
The house maintained its 'overweight' call on the REIT sector, and named Sunway REIT as its top pick, while Pavilion REIT is its second top pick, replacing Axis REIT (KL:AXREIT).
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