Reversionary Yield in Singapore REITs Explained

Reversionary Yield in Singapore REITs Explained

Reversionary yield (also called market yield or estimated rental value yield) is the yield a property could achieve if all leases were immediately re-let at current market rents — as opposed to the passing yield, which is the yield based on current contracted rents. For Singapore REIT investors, reversionary yield is a forward-looking signal of potential DPU growth embedded in the portfolio.

When reversionary yield > passing yield, the portfolio has positive reversion — meaning as leases roll over, rents should increase, boosting income. When reversionary yield < passing yield (negative reversion), rents are likely to fall at renewal, compressing income.

Passing Yield vs. Reversionary Yield: The Core Distinction

Consider a Singapore industrial property leased at S$1.80 psf/month on a lease signed in 2019, when market rents were lower. Current market rent for similar properties is S$2.20 psf/month. The passing yield (based on S$1.80) is, say, 5.5%. The reversionary yield (based on S$2.20) is approximately 6.7%. This positive reversion of ~1.2% translates directly into higher rental income when the lease renews — subject to actual market conditions at that time.

Conversely, a Grade A office REIT that signed 10-year leases at peak 2019 rents may have reversionary yields well below passing yields, indicating that income will fall when those leases expire in the early-to-mid 2020s — as many office REITs experienced.

How Reversionary Yield Affects DPU Outlook

A portfolio with strong positive reversion has embedded organic growth that does not require acquisitions or debt. As leases roll to market rates, rental income (and DPU) rises. This is especially valuable in periods of rising rents — Singapore industrial and logistics REITs with short WALEs and positive reversion delivered strong DPU growth in 2021–2023 as market rents surged.

For investors in S-REITs, monitoring the reversion spread (reversionary yield minus passing yield) across the portfolio helps forecast DPU trajectory over the next 2–3 years.

Where to Find Reversionary Yield Data

Most S-REITs do not explicitly publish “reversionary yield” as a headline metric, but the components are available. Look for:

  • Portfolio valuation reports — Independent valuers often disclose ERV (estimated rental value) versus passing rent in property-level footnotes in the annual report.
  • Passing rent vs. market rent commentary — Many REITs state in their results presentations whether rents are at, above, or below market (e.g., “current passing rent 15% below market rent”).
  • Rental reversion statistics — The percentage by which renewed leases were signed above or below the expiring rent is a realised measure of reversion, and is typically disclosed for retail and industrial REITs each quarter.

Reversionary Yield vs. Acquisition Yield

When a REIT makes a new acquisition, the quoted NPI yield is the yield at current passing rents. If the property has significant positive reversion, the effective yield at full market rents (the reversionary yield) is substantially higher — making the acquisition more accretive than the headline yield suggests. Sophisticated investors assess both metrics when evaluating a REIT acquisition announcement. For a fuller picture of REIT yield metrics, see our guide on NPI yield and DPU.

What does positive reversion mean for a Singapore REIT?
Positive reversion means current market rents are higher than the REIT’s contracted (passing) rents. When leases expire and are renewed at market rates, rental income should increase — supporting DPU growth without the need for new acquisitions or debt.
How do I find reversionary yield for a Singapore REIT?
Check the annual report’s property valuation section for ERV (estimated rental value) vs. passing rent data. Also look at the quarterly results presentation — many REITs comment on whether passing rents are at, above, or below market, or disclose the rental reversion rate for renewals completed that quarter.
Is a high reversionary yield always good?
High reversionary yield implies large positive reversion, which is good if the REIT successfully leases up at market rates. However, it may also indicate the portfolio has older leases that haven’t been renewed — which itself is a risk if the REIT struggles to retain tenants at those higher market rents.
What is a negative reversion?
Negative reversion occurs when market rents are below current passing rents. This means the REIT is currently earning above-market rents that will decline at lease renewal — a headwind to DPU. Office REITs with peak 2019 leases rolling in 2022-2024 faced significant negative reversion.
Does reversionary yield affect REIT valuation?
Yes. Property valuers incorporate ERV into cap rate-based valuations. Higher ERV (positive reversion) supports higher property valuations, which increases NAV per unit and reduces gearing ratios — a positive feedback loop for the REIT.

Go Deeper on S-REIT Yield Metrics

Reversionary yield, passing yield, and NPI yield are the three lenses for evaluating Singapore REIT income quality. Explore our full S-REIT investment hub for yield comparisons, sector guides, and portfolio analysis tools tailored for Singapore retail investors.