Income-focused investors can participate in the long-term growth of artificial intelligence and digitalization while maintaining consistent dividend income.

Singapore investors have two SGX-listed REIT options for data center exposure: Keppel DC REIT and Digital Core REIT.

This analysis examines which REIT presents the better investment opportunity currently.

The Rising Value of Data Centers

Global demand for data centers has surged as they form the essential infrastructure supporting the digital economy, with Singapore participating in this trend.

This growth is driven by increasing requirements for AI processing, cloud computing services, and substantial data storage and processing capabilities.

This represents a permanent structural change rather than a temporary demand spike.

The capital-intensive and specialized nature of data centers creates significant entry barriers, providing protection for existing operators.

Business Profiles: Keppel DC REIT versus Digital Core REIT

The two REITs demonstrate distinct operational characteristics.

Keppel DC REIT maintains a Singapore-centric portfolio with established Japanese operations and selective European presence.

The REIT's assets are high-quality properties leased to creditworthy, blue-chip tenants.

Keppel DC REIT currently trades near S$2.30 per unit.

Based on its 2025 distribution per unit of S$0.1038, the REIT offers a 4.5% annualized yield.

For the first quarter ending March 31, 2026, revenue increased 18.4% to S$121.0 million while net property income grew 19.4% to S$105.2 million.

The REIT maintains conservative leverage at 35.1% with strong interest coverage of 7.2 times.

Borrowing costs remain low at 2.6% with well-structured debt maturities averaging 3.3 years, minimizing refinancing requirements.

Digital Core REIT operates primarily in the United States with additional properties in Canada, Europe, and Japan.

The US-focused REIT trades at US$0.50 per unit.

Based on full-year 2025 DPU of US$0.036, Digital Core REIT offers a 7.2% current yield.

First-quarter 2026 revenue remained stable at US$44.1 million while net property income declined 4.9% year-over-year to US$21.3 million.

The REIT maintains reasonable leverage at 39% with interest coverage of 3.3 times.

With borrowing costs of 3.5% and weighted average debt maturity of 3.5 years, refinancing needs appear manageable.

Portfolio Characteristics

Keppel DC REIT owns 25 data centers across 10 countries as of March 31, 2026.

Singapore, Europe, and Japan represent 91.6% of assets under management.

Internet enterprise customers constitute 69.6% of the tenant base with occupancy reaching 95.6%.

Investors should note concentration risk: the top client, a Fortune Global 500 hyperscaler, contributed 42.8% of first-quarter rental income, while the top ten clients represented 83.5% collectively.

The portfolio maintains strong income visibility with weighted average lease expiry of 6.5 years.

Digital Core REIT's smaller portfolio includes 11 data centers, with 10 operational and one Virginia property undergoing redevelopment.

Seven properties are located in the United States.

Three companies generate over 50% of rental income, with tenant composition comprising 60% hyperscalers, 34% colocation/IT service providers, and 6% social media and other tenants.

Occupancy stands at 97% with weighted average lease expiry of 4.4 years providing reasonable income visibility.

Keppel DC REIT's broader portfolio enhances income stability compared to Digital Core REIT, though both face customer concentration concerns.

Both REITs can leverage sponsor pipelines for accretive acquisitions to drive future growth.

Potential rental increases and asset enhancement initiatives could strengthen net property income and occupancy rates for both entities.

Distribution Profiles: Yield Versus Scale Considerations

Keppel DC REIT represents the larger entity with superior income visibility through portfolio diversification and broader geographic reach.

This stability comes with a lower 4.5% yield compared to Digital Core REIT's 7.2%.

Digital Core REIT offers greater growth potential through the upcoming completion of its Linton Hall redevelopment and management's active unit repurchase program.

Keppel DC REIT suits income-focused investors seeking stability, while Digital Core REIT appeals to those prioritizing capital appreciation potential and higher yield despite a smaller portfolio.

Important Risk Factors

Both REITs face risks from rising interest rates, which would increase borrowing costs and potentially reduce distributions.

Significant reliance on major tenants creates concentration risk for both entities.

Continuous technological upgrades in data center infrastructure could lead to obsolescence risks for both REITs' properties.

Valuation Assessment

Keppel DC REIT trades at a last twelve months price-to-book ratio of 1.4 times compared to Digital Core REIT's 0.6 times.

Keppel DC REIT's current 4.5% yield slightly trails its five-year average of 4.7%, while Digital Core REIT's 7.2% yield substantially exceeds yields since its 2022 inception.

Market pricing appears reasonable for data center growth potential, with clear preference for scale evidenced by Keppel DC REIT's lower yield.

Growth Potential Versus Stability

Investors seeking data center exposure must evaluate portfolio quality, financial strength, and income reliability when selecting between these REITs.

Income-focused investors may prefer Keppel DC REIT for distribution stability.

Growth-oriented investors might select Digital Core REIT for portfolio inclusion.

The decision ultimately depends on investment timeframe and individual preference for growth versus income characteristics.