Pavilion REIT stands out due to its strong exposure to tourist spending and its hospitality assets, which will contribute a full year of earnings in 2026. –Bernama photo
KUCHING (Jan 19): Malaysian Real Estate Investment Trusts (REITs) are expected to remain stable in 2026 thanks to a resilient domestic consumption while tourism uplift and growing industrial demand drives growths, says analysts from RHB Investment Bank Bhd (RHB Research).
In a sector update on Jan 15, the analyst highlighted that the Bursa Malaysia REIT Index (KLREI) rose 8.3 per cent in 2025, outperforming the broader FBM KLCI’s 2.7 per cent gain. They opined that the REIT sector will continue to be a defensive yield play in 2026.
“A stable, low-interest rate environment remains conducive for asset expansion via debt, while identifiable catalysts like Visit Malaysia Year 2026 (VMY2026) and policy-led industrial initiatives should support occupancy and rental growth,” they said.
Retail-focused REITs especially are expected to remain a bright spot in 2026, backed by near-full occupancies at prime malls and positive rental reversions.
RHB Research noted that most management teams have generally guided for mid-single-digit rental growths in 2026, with tourist-heavy assets expected to outperform as visitor arrivals rise under VMY2026.
Among it is the analyst’s top picks, Pavilion REIT stands out due to its strong exposure to tourist spending and its hospitality assets, which will contribute a full year of earnings in 2026.
Prime malls such as Pavilion Kuala Lumpur, Suria KLCC and Sunway Pyramid are seen as better insulated from new retail supply due to their destination appeal.
Similarly, Industrial REITs are expected to continue expanding thanks to long weighted-average lease expiries (WALEs), resilient logistic demand and policy initiatives including the Johor-Singapore Special Economic Zone (JS-SEZ), the New Industrial Master Plan (NIMP 2030) and the National Energy Transition Roadmap (NETR).
These policies are expected to push demand for industrial space in areas such as Klang Valley, Johor and Penang.
RHB Research highlighted AME REIT as its preferred industrial play, citing high occupancy rates, recurring rental step-ups and growing demand in Johor from multinational corporations seeking cost-efficient expansion locations
In contrast, the office segment continues to face headwinds from oversupply, with Klang Valley occupancy hovering at around only 80 per cent. Leasing demand remains skewed towards newer, ESG-compliant and transit-linked buildings, leaving older assets at risk unless repositioned.
Within the segment, RHB Research views Sentral REIT as relatively defensive due to its long-tenured tenants and higher yield profile.
Overall, RHB Research expects 2026 to be a stable year for the REITs sector but cautions that withholding tax (WHT) treatment on REIT distributions would be a potential overhang for foreign investor demand.
Should concessions not be renewed, net yields for affected investors could compress by 50–100 basis points, potentially diverting marginal flows to regional peers. However, the research house stressed that domestic institutional ownership remains a stabilising factor for the sector
While still under review, with the WHT concession removed, the key risk is that net yields could compress by a further circa 50 to 100 basis points, effectively lowering the net yields to circa 3.5 to 4.0 per cent without any change in underlying REIT fundamentals,” the analyst shared.
Despite this, RHB Research said that this would not undermine the sector’s domestic investment case as REIT’s shareholdings remain anchored by government-linked companies and local institutions, which are not directly affected by changes in WHT concessions.
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