Keppel DC REIT: Data Center Portfolio Remains Resilient Despite Trade War

Keppel DC REIT’s first-quarter 2025 performance was in line with our expectations. Net property income grew 13.9% year on year to SGD 88.1 million, driven by higher contributions from lease renewals and acquisitions of Keppel DC Singapore 7 and 8, as well as Tokyo Data Centre 1. The trust maintained a healthy portfolio occupancy rate of 96.5% as of the end of March 2025, alongside a positive rental reversion of 7%. With no surprises, we retain our fair value estimate of SGD 2.34 per unit. We think the recent selloff of its units due to the ongoing trade war presents a buying opportunity for this undervalued REIT. While Trump’s tariffs could negatively affect data centers and cloud operators in the US, we consider KDC REIT to be less affected, given that its data center portfolio is concentrated in the Asia-Pacific and Europe, with no assets in the US. We believe the demand and supply dynamics for its Singapore data centers remain healthy, supporting a resilient performance for the trust. The trust also has three data centers in China, to which we do not ascribe any value, given the ongoing tenant issue.