Published on June 3, 2026 (1–9 minute read)

Following the end of REIT earnings season, CenterSquare portfolio managers around the globe share their regional perspectives. In this edition, our teams in Singapore and London break down key themes across APAC and EMEA listed real estate, from central bank divergence and energy cost passthrough to logistics recoveries and consumer resilience.

APAC REITS

How would you characterize the macro backdrop that APAC listed real estate companies reported into, particularly the impact of energy inflation on the back of the conflict in the Middle East being so pronounced for the region?

In Australia, the dominant macro pressure was RBA tightening rather than energy prices, with a third rate hike in May. Though fuel-related construction cost inflation is an emerging risk for residential and logistics development pipelines, commercial landlords are largely insulated by tenant pass-through structures.

In Japan, the developers acknowledged the Middle East conflict in guidance language, and construction cost risk is being managed proactively given the high proportion of pre-sold and already-completed condo inventory. Funding costs are beginning to creep up as BOJ normalisation feeds through, though they remain low in absolute terms and are more than compensated by rent growth across multiple sectors.

Singapore’s energy exposure is well-contained; utility costs account for a small share of SREIT operating expenses and are largely hedged or passed through to tenants. Geopolitical uncertainty is having a more tangible effect, slowing private capital deployment timelines.

For Hong Kong, the key issue remains the underlying demand for retail and office, which is recovering from very low lows. Residential is performing very well and, for now, the market seems unbothered by rate risk.

We've been bullish about the Australian market, how did results out of the AREITs support or challenge that thesis?

In retail, consumer spending held up well with tenant sales, specialty rent escalations, and leasing spreads all accelerating, reflecting a resilient household sector ahead of the latest rate moves.

Industrial operating metrics remain healthy with high occupancy and positive leasing spreads, though the pace of reversion capture is moderating as portfolios become less under-rented.

Office fundamentals are improving — occupancy is rising, incentives are tightening, and net effective rents in Sydney and Brisbane CBDs are growing at a healthy clip, while Melbourne continues to lag, given a far more pronounced supply overhang.

Residential sales volumes declined in the first quarter following the second RBA hike, and operators flagged some further moderation into April. Pre-sales books remain well-stocked, and the underlying structural demand for Australian housing remains intact; the near-term softness reflects market participants adjusting to budget changes and the rate cycle rather than any fundamental demand deterioration.

Japan has been a unique market related to central bank policy with hikes that have been long-expected – it's no longer the only central bank increasing policy rates – Shunto wage negotiations came in strong above 5% again for the third year, office vacancy in Tokyo remains in the low-2% range – how are pricing power and inflation being captured by the JREITs?

JREIT office rent gaps remain deeply negative, with in-place rents running 14-16% below market, providing multi-year reversionary potential. Reversions are accelerating, with replacement rents growing in the high-single to low-double digits range against a backdrop of extremely tight Tokyo office vacancy. The counterbalance is rising debt costs, as expiring debt is being refinanced at 150-200bps higher rates. BOJ rate rises are partially absorbing NOI uplift, though rent growth is still winning. On the developer side, office landlords are targeting rent hikes in excess of 20% on well-located renewals, with tenant acceptance rising.

The Singapore market is very exposed to the energy price shock – listed real estate companies were already priced relatively expensively in the market – did the companies deliver on results that justify those valuations? How is the market changing on the ground as a result of the conflict in the Middle East?

Most SREITs have energy cost exposure hedged through 2027-28, making the near-term P&L impact negligible. Singapore-domiciled assets are the clear earnings bright spot, with office, industrial, and suburban retail all reporting positive reversions and occupancy gains, while overseas portfolios continue to lag and weigh on headline DPU growth.

The consumer has generally been a bright spot supporting retail real estate across the region – has the energy shock impacted this yet?

Australia: no direct impact is visible yet, though a moderation in luxury spending in March suggests rate sensitivity may be emerging.

Japan: consumers benefited from sustained wage growth and a drop in inflation, leading to improved real income growth and higher consumption. The government is also likely to retain energy subsidies, further reducing the impact of higher energy costs on consumers.

Singapore: mall metrics remained healthy with positive traffic and tenant sales growth, and utility cost hedging means occupancy costs are not under pressure.

Hong Kong: retail was a standout positive, with strong discretionary sales growth in HK and slower but stable improvements in non-discretionary retail spending.

Were there any updates this quarter that caused you to change a thesis that you had going into earnings season?

Australian residential will likely see some near-term uncertainty, with sales slowing somewhat and construction cost inflation a risk. However, pre-sales books remain well-supported, default rates are low, and structural undersupply keeps the long-term demand thesis intact.

Forward guidance from Japan’s developers was more conservative than expected, with Middle East uncertainty and development completion timing both cited as factors. Beneath the headline numbers, however, core office leasing is performing strongly, condo margins are high, and rent hike acceptance by tenants is rising.

European REITS

How would you characterize the macro backdrop that EMEA listed real estate companies reported into, particularly the impact of inflation on the back of the conflict in the Middle East and the resulting shift in central bank policy expectations?

Since the onset of the conflict in the Middle East, we have gone from an expectation of a benign and falling inflationary environment to one where inflation in most countries is rising. Economic growth is slowing and whilst recessions remain unlikely for now, the risks continue to increase. Central bank policy has shifted from a broadly stable footing in Europe and an easing trajectory in the UK to widespread expectations of rate increases. We’ve had an interest rate hike in Norway with the possibility of the EU and UK following suit. Bond yields have risen everywhere, but the risks remain most acute in the UK. The risk of an energy price shock and heightened political uncertainty has particularly spooked the UK bond market, with 30-year government bonds at almost 30-year yield highs.

How would you generally characterize the results out of the UK vs the Nordics vs the EU? What drove the differences across these regions?

In the UK, results were mixed, with industrial generally the strongest, but there have also been incremental improvements in the office occupier market at the prime end. Some of the more specialist sectors have seen the biggest disappointments, with self-storage continuing to see the biggest slowdown in growth and increase in vacancy along with student accommodation. Higher leverage in the Nordics has hurt names as higher interest rates continue to cause the most pain with short-term debt needing refinancing. Office, particularly outside of Stockholm, has continued to weaken. In the EU, growth remains reasonable within industrial, retail and healthcare, but everything is generally slowing with lower indexation pass-through.

We’ve been closely watching the healthcare sector given the demographic impacts driving demand for the sector – what are you hearing from the sector and has your thesis changed?

An aging population continues to create strong demographic tailwinds for the healthcare sector, particularly in senior housing. M&A has also helped, but finding drivers for future growth outside of acquisitions is becoming harder. The move in bond yields has increased the cost of capital, and whilst there is still growth there, it has slowed. There are some opportunities in development, and we do still believe it offers value. It’s also worth highlighting the UK Primary Care space within healthcare. We continue to view the subsector favorably, as all political parties in the UK are committed to spending more on healthcare and moving treatments out of hospitals and into the community. This is leading to higher rent levels and better earnings growth. It remains a good hedge against major political and economic uncertainty with good risk-adjusted growth.

German residential has historically been a defensive sector across European listed real estate – do you still view it that way?

Whilst this was historically the case, the current economic environment brings the thesis into question. Historically in a low inflation, low growth, and low interest rate environment, German residential would be defensive. We are now in a potentially higher-inflationary environment, with rising bond yields in a sector that remains relatively highly leveraged. The increasing rents continue to be offset by higher debt costs. The low yield for the sector, combined with the high German government bond yield, also increases the risk of value declines that could force more de-leveraging and lower earnings.

The logistics sector has been going through some normalization after incredible growth coming out of the pandemic and now has a data center development kicker, but we’re waiting for the recovery to really materialize in earnest – did you hear any indications of that from companies in the region?

In the UK, logistics growth looks pretty good. We have seen pickups in leasing momentum and vacancy declines. There remains significant reversion in the portfolios, especially compared to the continent, where indexation pass-through every year has slowed overall growth. Data Center development is providing a kicker too, especially where power requirements were sourced ahead of time, whilst the level of speculative logistics development has decreased as a whole, helping to support current development yields.

Were there any updates this quarter that caused you to change a thesis that you had going into earnings season?

I think for us, the main shift is in our country and regional preferences now versus going into earnings season. We started earnings season knowing inflation in the UK was a concern and that bond yields could rise. The shock has been how quickly and how much more relatively yields have moved in the UK. The market is now beginning to price in what could be a much quicker change to a more progressive government following a significant election setback for the Labour party. Historically the lower leverage and better corporate governance, along with generally higher quality earnings growth, led to our preference for the UK over Europe Ex UK. Now there is a meaningful risk of a UK bond crisis, which increases our desire to reduce exposure to lower-implied-cap-rate stocks and the British Pound.

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