MALAYSIAN REITs (M-REITs) outperformed in 2025, with the KLREIT index gaining +8.3% vs +2.3% for the KLCI, driven by the Jul-25 overnight policy rate (OPR) cut and investors tilting towards defensive stocks amid external tariff woes.
“For 2026, we expect the sector to be well supported by an accommodative interest rate environment, supportive policy backdrop and improving operating conditions across most REITs
Segments,” said Hong Leong Investment Bank (HLIB).
Retail and hospitality REITs stand to benefit from the Visit Malaysia 2026 (VM2026) campaign, given rising tourist arrivals, stronger Chinese visitor momentum and improving cross-border connectivity.
While Klang Valley retail supply is on the rise in the second half of 2025 (2H25) and 2026, HLIB expect dominant malls with strong catchment areas to remain resilient – these include Sunway REIT, Pavilion REIT and KLCC Stapled Group.
“Johor’s retail fundamentals remain supportive in our view, backed by Singaporean spending and improving connectivity, benefitting IGB REIT, Al-Salam REIT (non-rated) and Paradigm REIT (non-rated),” said HLIB.
Office market conditions are stabilising, with 2025 supply growth at a manageable 1.3%, supported by demand from higher value and technology driven industries.
While the 2026 supply pipeline is larger and may lead to tenant relocations into newer buildings with superior specifications and locations, HLIB reckons that overall demand fundamentals remain supportive.
“Within the segment, we feel that IGB Commercial REIT is best positioned, underpinned by its strategically located assets in Mid Valley City with strong transport connectivity and adjacency to established retail offerings,” said HLIB.
The industrial segment remains well supported by sustained manufacturing investment momentum and structural tailwinds from national roadmaps such as NIMP 2030, NETR and GEAR-uP.
Positive rental reversion and high occupancy continue to signal tight supply for quality industrial space, positioning Axis REIT as a key beneficiary.
“We maintain OVERWEIGHT on the M-REITs sector, supported by attractive valuations and constructive fundamentals into 2026, underpinned by Visit Malaysia 2026,” said HLIB.
This is not to forget the lower interest rate environment, continued government support for household consumption and the reduction in service tax on rentals. —Jan 14, 2025
Main image: Propertyguru
