Malaysia's REIT sector still offers defensive appeal backed by tourism push, policy support, says RHB Research

KUALA LUMPUR (March 17): Malaysia’s real estate investment trust (REIT) sector remains a defensive investment case supported by steady dividend yields and domestic growth catalysts led by Visit Malaysia 2026, RHB Research said.

The optimistic outlook comes even as some observers caution that the tourism campaign may face headwinds from rising geopolitical tensions, particularly in the Middle East, which could drive up airfares and dampen long-haul travel demand.

“We believe investors’ appetite for defensive and domestic-centric earnings, and regular dividend distribution remains strong — especially with the recent geopolitical tensions,” RHB Research said in a note on Tuesday.

REIT counters remain fairly valued even as dividend yield spreads have narrowed towards their long-term averages following valuation gains over the past year, the research house added. 

Data compiled by Bloomberg showed that the Bursa Malaysia REIT Index, which tracks 30 listed REITs, was yielding about 5.20% as of Monday, which compared favourably against 3.57% for Malaysia’s 10-year government bonds, or Malaysian Government Securities (MGS).

RHB Research opined that retail-focused REITs are expected to benefit from tourism-driven spending under the government’s Visit Malaysia 2026 campaign, which aims to attract 47 million international tourist arrivals. Assets with meaningful exposure to retail traffic and variable rental structures could see stronger earnings, according to the research house.

Among the beneficiaries identified were Pavilion Real Estate Investment Trust (KL:PAVREIT), IGB Real Estate Investment Trust (KL:IGBREIT) and Sunway Real Estate Investment Trust (KL:SUNREIT), which own major retail malls in Malaysia’s urban centres.

At the same time, industrial REITs could also continue to benefit from structural demand supported by government policy initiatives, RHB Research added. These include the New Industrial Master Plan 2030 and the National Energy Transition Roadmap, both of which aim to strengthen Malaysia’s industrial ecosystem and energy transition infrastructure.

The research house named AME Real Estate Investment Trust (KL:AMEREIT) among its top picks, citing strong demand for industrial space in Johor as well as favourable rental reversion prospects.

The office segment, however, remains the laggard within the sector, as many office-focused REITs are still trading below their book value. 

Nevertheless, RHB Research said there are early signs of recovery, noting that net office absorption has turned positive for four consecutive quarters, suggesting gradually improving occupancy conditions.

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