Chua Jen-Ai, an Asia equity research analyst at Julius Baer, observes a "positive but decelerating momentum" among Asian REITs in Q3 2025.

In Q3 2025, Asian REITs once again showed strong performance, achieving total US dollar-denominated returns of 23% for the nine months ending in 2025, outpacing Asian credit markets, which increased by 7%, and global equities, which rose by 18%.

The quarterly returns for Asian REITs stood at 6.1% in Q3 2025, reflecting a slowdown from the double-digit gains recorded in Q2 2025. This deceleration may be attributed to a stronger US dollar and rising short-term interest rates in markets like Japan and Hong Kong during Q3 2025, according to Chua's note dated October 16.

"Interest rates for the overall region are generally expected to remain soft for the rest of the year, and sentiment regarding the US dollar is also somewhat pessimistic," she adds. "We maintain a positive outlook on the sector."

Asian REITs achieved total US dollar-denominated returns of 6.1% for Q3 2025, leading to a "healthy" return of 22.6% for the nine months of 2025, says Chua.

Despite the decrease in returns for Q3 2025 from the "blistering" 13.1% posted in Q2 2025, they remain close to the Q3 2025 returns in the US (8.1%) and the broader Asian equity market (9.4%), she notes. "This indicates that while price momentum for Asian REITs is moderating somewhat, it remains strong."

Singapore and Japan REITs Outperform

REITs in Singapore and Japan outperformed the sector, achieving total returns of 7% and 6.8% in US dollar terms for Q3 2025, while REITs in Australia and Hong Kong lagged behind, posting returns of 5.3% and 3.7%, respectively.

Currency performance had less influence last quarter, as the weaker Singapore dollar and Japanese yen adversely impacted US dollar-denominated returns in these REIT markets, according to Chua.

However, the appreciation of the Hong Kong dollar and Australian dollar mildly enhanced returns for REITs in these regions, as noted by Chua.

"Interest rates in key REIT markets diverged in Q3 2025, with the three-month Singapore Overnight Rate Average and Australia's three-month Bank Bill Swap Rate decreasing by 60 basis points and 3 basis points, respectively; conversely, the three-month Tokyo Interbank Offered Rate and Hong Kong Interbank Offered Rate increased by 5 basis points and 185 basis points, respectively," states Chua.

Year to date, short-term rates in Singapore, Hong Kong, and Australia remain "well below" their January levels, Chua writes.

The Bank of Japan's unexpected announcement in September regarding the liquidation of its holdings in exchange-traded funds (ETFs) and Japan REITs surprised the market. Nevertheless, the slow pace of these divestments - with Governor Kazuo Ueda suggesting it could take 100 years to sell off these assets - indicates that any market impact is unlikely to be significant, according to Chua.

Additionally, signs of recovery in the Hong Kong retail market in August, bolstered by record monthly arrivals from mainland China - the highest since the border reopened - bode well for commercial landlords, says Chua.

The announcement of another REIT listing in Singapore — Centurion Accommodation REIT — also implies that efforts to revitalize the market in Singapore are gaining momentum, she adds.

"We believe that the anticipation of lower interest rates should continue to support returns for Asian REITs, especially as the US is widely expected to cut interest rates at the upcoming Federal Open Market Committee meeting on October 28-29. We continue to maintain a generally positive perspective on the sector," concludes Chua.