REIT Cost of Debt (Singapore)
Why Keppel DC REIT borrows at 2.6% while others pay north of 3.5% — and what a falling cost of debt means for your DPU.
Cost of debt for a Singapore REIT is the weighted average interest rate it pays across all its borrowings — bank loans, medium-term notes, and other facilities — disclosed each quarter and used by investors to judge financing efficiency and refinancing risk.
Not financial advice. All figures for educational reference only. Data as at July 2026.
Last updated: July 2026
Key Takeaways
- The average cost of debt across S-REITs fell by roughly 40 basis points year-on-year as at end-March 2026, with a further 10 basis point decline expected through the rest of the year.
- Individual REITs vary meaningfully: Keppel DC REIT reported 2.6% cost of debt at 1Q26, Mapletree Logistics Trust around 2.6%, CICT around 3.3%, and OUE REIT around 3.6% as at mid-2026.
- Falling cost of debt is driven mainly by 3-month SORA sitting roughly 100 basis points below year-ago levels, as MAS policy has eased through 2025-2026.
- A lower cost of debt directly widens the spread against acquisition yields, making DPU-accretive deals easier to find and execute.
- Cost of debt should always be read alongside the REIT’s debt maturity profile and % of fixed-rate debt, since a low current cost of debt can still spike sharply at refinancing if a large tranche of debt is due soon.
What Is REIT Cost of Debt?
Every Singapore REIT funds part of its property portfolio with borrowed money — typically a mix of bank loans, medium-term notes (MTN) issued under an established debt programme, and sometimes perpetual securities that sit between debt and equity. Cost of debt is the weighted average interest rate across all of these facilities, expressed as a single percentage figure that REIT managers disclose in their quarterly and annual results.
It matters for three connected reasons. First, it is one half of the “accretion spread” that determines whether a new acquisition is DPU-accretive (see the related glossary entry): the lower a REIT’s cost of debt, the wider the gap it can capture between a property’s net yield and its financing cost. Second, cost of debt directly affects distributable income — every basis point saved on borrowing costs across a multi-billion-dollar debt book flows straight through to distributable income and therefore DPU. Third, it is a proxy for a REIT’s credit quality and negotiating power: REITs with stronger sponsor backing, higher credit ratings, and larger, more diversified debt books tend to secure meaningfully lower borrowing costs than smaller or more leveraged peers.
Cost of debt in Singapore is closely tied to the Singapore Overnight Rate Average (SORA), which has replaced SIBOR as the primary benchmark for SGD-denominated floating-rate loans; REITs with SGD-denominated debt see their cost of debt move with SORA, while those with a meaningful share of foreign-currency debt (common among REITs with overseas assets) are additionally exposed to offshore base rates like SOFR or EURIBOR.
How Does It Work in Singapore?
REIT managers calculate and disclose cost of debt as a weighted average across their entire outstanding debt book — not a simple average of individual facility rates, since larger loans should carry proportionally more weight in the figure. It is typically reported alongside two other closely related disclosures: the percentage of debt on fixed rates (hedged against rate volatility) versus floating rates, and the weighted average debt maturity (how many years, on average, until the debt book needs refinancing).
As at mid-2026, several data points illustrate the range across the sector:
- Keppel DC REIT: cost of debt improved to 2.6% at 1Q26, down from 2.8% at 4Q25.
- Mapletree Logistics Trust: weighted average borrowing cost eased to 2.6% for 2Q FY25/26, down from 2.7% the prior quarter.
- CapitaLand Integrated Commercial Trust (CICT): cost of debt around 3.3% (as of late 2025), down from 3.4% the previous quarter.
- OUE REIT: weighted average cost of debt improved to 3.6% per annum as at 30 June 2026.
Sector-wide, the average cost of debt across S-REITs declined roughly 40 basis points year-on-year as at end-March 2026, with a further ~10 basis points of decline expected over the remainder of the year, driven primarily by 3-month SORA sitting about 100 basis points below its level a year earlier as MAS policy settings eased.
REIT Cost of Debt Example
A REIT with S$2 billion in total borrowings and a 3.2% weighted average cost of debt pays roughly S$64 million a year in interest expense across its debt book. If refinancing activity and lower SORA bring that cost of debt down to 2.8% over the following year — a 40 basis point improvement, roughly in line with the sector-wide trend as at early 2026 — annual interest expense falls to about S$56 million, an S$8 million saving that flows almost entirely through to distributable income, since it does not require any change to the underlying property portfolio.
Spread across, say, 2 billion units outstanding, an S$8 million improvement in distributable income is worth roughly 0.4 cents of additional DPU per year — illustrating why a REIT’s ability to refinance maturing debt at lower rates in a falling-rate environment can be as meaningful to unitholders as an actual acquisition, without any new property being bought at all.
Advantages
A falling cost of debt directly boosts distributable income without requiring any new acquisitions, simply through refinancing maturing debt at lower prevailing rates.
Lower cost of debt widens the accretion spread on future acquisitions, making it easier for a REIT to find and execute genuinely DPU-accretive deals.
Serves as a useful cross-REIT comparison metric. Comparing cost of debt across REITs of similar size and sector gives a quick read on relative credit strength and sponsor support.
Well-managed REITs actively use interest rate hedges (fixing a portion of floating-rate debt) to lock in favourable rates and reduce cost-of-debt volatility across rate cycles.
Risks and Limitations
Cost of debt can rise sharply if rates reverse. The 2025-2026 decline has been driven by SORA falling on MAS policy easing; a future tightening cycle, as some REITs have already flagged as a risk, could push cost of debt back up.
A low current figure can mask refinancing risk. A REIT with a large tranche of debt maturing soon, in a higher-rate environment than when that debt was originally priced, can see its cost of debt jump at the point of refinancing, even if the current figure looks favourable.
Foreign-currency debt adds a layer of complexity. REITs with overseas assets financed in USD, EUR, or GBP are exposed to those currencies’ own base rates, which do not always move in the same direction as SGD SORA.
Comparing cost of debt across REITs without context can mislead. A REIT with a shorter average debt maturity, more floating-rate exposure, or a smaller, less diversified lender base may show a temporarily low cost of debt that is less stable than a peer’s higher but more locked-in rate.
Cost of Debt vs Interest Coverage Ratio (ICR)
| Feature | Cost of Debt | Interest Coverage Ratio (ICR) |
|---|---|---|
| What it measures | The average interest rate paid across all borrowings | How many times over a REIT’s income covers its interest expense |
| Expressed as | A percentage (e.g. 3.2% per annum) | A multiple (e.g. 4.5x) |
| Primary use | Judging financing efficiency and refinancing risk | Judging a REIT’s ability to service debt from operating income |
| MAS regulatory relevance | Indirectly, via gearing and leverage rules | Directly — MAS requires disclosure and ties gearing limits to ICR |
| Typical 2026 sector range | ~2.6%-3.6% depending on the REIT | Commonly 3x-6x depending on the REIT |
Source: REIT quarterly results (Keppel DC REIT, MLT, CICT, OUE REIT), StocksBNB sector reports, as at Jul 2026.
The Bottom Line
Cost of debt is one of the simplest, most direct levers on a Singapore REIT’s distributable income, and 2026 has been a favourable year for it sector-wide as SORA has eased roughly 100 basis points from year-ago levels. But the headline percentage only tells half the story — the debt maturity profile and the proportion hedged at fixed rates determine how durable that low cost of debt actually is once existing facilities come up for refinancing.
Frequently Asked Questions
What is a good cost of debt for a Singapore REIT in 2026?
As at mid-2026, cost of debt across major S-REITs ranges from roughly 2.6% (Keppel DC REIT, Mapletree Logistics Trust) to around 3.6% (OUE REIT), so anything toward the lower end of that range is considered comparatively strong.
Why has S-REIT cost of debt been falling in 2026?
Primarily because 3-month SORA has been running roughly 100 basis points below year-ago levels, as MAS policy settings eased, reducing the floating-rate portion of most REITs’ borrowing costs.
How does cost of debt affect DPU?
A lower cost of debt reduces interest expense, directly increasing distributable income and therefore DPU, without requiring any change to the property portfolio.
Is a REIT with the lowest cost of debt automatically the best investment?
Not necessarily — cost of debt should be read alongside the debt maturity profile, percentage hedged at fixed rates, and gearing ratio, since a low current figure can still be vulnerable to refinancing risk.
What benchmark rate do most S-REITs' floating debt track?
Most SGD-denominated floating-rate debt tracks the Singapore Overnight Rate Average (SORA), which has replaced SIBOR as the standard reference rate.