Data centre S-Reits stay resilient on AI tailwinds

[SINGAPORE] Pure-play data centre (DC) real estate investment trusts in Singapore (S-Reits) have delivered resilient financial performance in their latest results ended December, with high occupancy and strong rental reversion amid cloud and artificial intelligence (AI) adoption.

The three pure-play DC S-Reits – Keppel DC Reit, Digital Core Reit and NTT DC Reit – also saw stronger distributable income in the latest reporting period, on the back of higher revenue.

CBRE noted in a report this month that forecasts for aggregate hyperscale capital expenditure in 2026 are north of US$400 billion globally, with the likes of Google, AWS, Microsoft and Meta committed to scaling up AI infrastructure. It added that robust demand for both co-location and hyperscale DCs will continue to drive strong investor interest in 2026.

Keppel DC Reit delivered a strong performance in FY2025, with distributable income growing 55.2 per cent year on year, while distribution per unit (DPU) rose 9.8 per cent to a record S$0.10381.

This came on the back of 42.2 per cent growth in gross revenue, driven by S$1.1 billion of accretive acquisitions in Tokyo and Singapore, as well as higher contributions from contract renewals and escalations. The Reit launched a preferential offering last September to raise S$404.5 million to partially finance the acquisition of a Tokyo Data Centre.

Keppel DC Reit’s rental income from hyperscalers rose to 69.3 per cent as at end-December 2025, from 61.1 per cent a year ago. It also saw strong rental reversion of 45 per cent for the year and portfolio occupancy of 95.8 per cent. 

In terms of outlook, Keppel DC Reit’s manager noted that data centre growth will be fuelled by continued cloud adoption, rapid digitalisation and the scaling of AI workloads, and megatrends such as cloudification and agentic AI will support its efforts to create sustainable, long-term value for unitholders.

DBS Group Research analyst Dale Lai noted that Keppel DC Reit’s earnings visibility will be supported by its high occupancy and weighted average lease expiry (WALE) of 6.7 years, while tailwinds from falling interest rates are expected to support lower financing costs. 

However, earnings growth may be partially offset by impending divestments, and a key swing factor would be how quickly capital from divestments can be recycled. He has a “buy” rating on the Reit with a S$2.60 target price.

DBS Group Research also has “buy” ratings on NTT DC Reit and Digital Core Reit with target prices of US$1.20 and US$0.70, respectively. Lai noted that Digital Core Reit has pipeline assets from its sponsor valued at more than US$15 billion, allowing it to potentially grow into the largest pure-play DC S-Reit. “Its healthy debt headroom provides it the financial flexibility to embark on further accretive acquisitions. We believe that once markets become more conducive for further acquisitions, Digital Core Reit will be able to grow further,” he said.

Digital Core Reit reported stable DPU for FY2025, while distributable income grew 1.9 per cent, with its manager noting that favourable fundamentals have resulted in robust new and renewal leasing volume.

During the year, the Reit signed leases representing US$26 million of annualised rental revenue, with 31 per cent cash rental reversions. The Reit reached a 10-year agreement with an investment-grade global cloud service provider to occupy its entire facility at Linton Hall in Virginia, at a 35 per cent increase over previous net rent. 

Meanwhile, NTT DC Reit – which listed on the SGX mainboard in July 2025 – reported stable performance in line with its initial public offering (IPO) forecasts. The Reit had nine-month revenue of US$106 million, up 1.7 per cent from its adjusted IPO forecast, while distributable income was up 0.4 per cent to US$36.3 million.

The manager noted that leasing performance was driven by strong demand, with committed portfolio occupancy of 97.3 per cent, and 9.2 per cent rent reversion. The Reit is in advanced negotiations with a related-party tenant at its SG1 DC, with expectations of achieving meaningful rent reversion.

NTT DC Reit has also been in discussions with its sponsor on a potential management fee structure change to enhance alignment with unitholders’ interests, with implementation targeted by the first half of FY2026/2027.

Retail investors have been net buyers of the three DC S-REITs with close to S$40 million net inflows for the year to Feb 19.

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the S-Reits & Property Trusts Chartbook.