IGB Commercial REIT (IGBCR) posted stronger first-quarter earnings for FY2026, supported by higher office occupancy rates and continued positive rental reversions across its portfolio.
According to M+ Global Research, the real estate investment trust recorded revenue of RM68.9 million for the first quarter ended March 31, 2026, representing a 10.5% year-on-year increase, while core profit after tax rose 14.3% to RM28.8 million.
Distributable income climbed 22.4% year-on-year to RM32.2 million, enabling the REIT to declare a distribution per unit (DPU) of 1.33 sen.
The research house attributed the improved performance to rising occupancy and higher rental rates across IGBCR’s office portfolio.
Occupancy strengthens across key assets
Portfolio occupancy improved to 92.9% during the quarter, driven by stronger leasing performance at its flagship assets.
Occupancy at Mid Valley City increased to 96.6%, up from 94.3% a year earlier, while occupancy at KL City rose to 86.7% from 80.6% over the same period.
Average monthly rental rates also continued to trend higher, increasing to RM6.60 per square foot compared with RM6.40 per square foot in the corresponding quarter last year.
Mid Valley City recorded stronger rental growth, with average rates rising to RM7.10 per square foot from RM6.80, while KL City edged up to RM5.80 per square foot from RM5.70.
M+ Global said the sustained improvement reflects the ongoing “flight to quality” trend, with corporate tenants increasingly favouring well-managed Grade A office buildings that offer green certifications, strategic locations and strong transport connectivity.
First Malaysian REIT with fully green-certified portfolio
The research house highlighted that IGBCR became the first REIT in Malaysia to achieve 100% Green Building Index (GBI) certification across its entire portfolio of 10 office properties in FY2025.
It said the environmental, social and governance (ESG) credentials provide the REIT with a competitive advantage in attracting multinational corporations with sustainability requirements while supporting premium rental rates.
Management also continues to undertake asset enhancement initiatives, including lobby refurbishments and energy-efficient lighting upgrades, to strengthen the long-term competitiveness of its buildings.
Tax changes pose sentiment risk
M+ Global noted that the Inland Revenue Board’s Practice Note No. 2/2026, which removes the preferential 10% withholding tax (WHT) on REIT distributions from the 2026 assessment year onwards, may reduce the sector’s attractiveness to some investors.
Under the revised tax treatment, resident individuals will now be taxed based on their respective personal income tax brackets of up to 30%, while non-resident individuals and foreign institutional investors will face a 30% withholding tax, compared with the previous 10%.
However, the research house emphasised that the changes do not affect REIT operating earnings or tax-transparent status, provided at least 90% of taxable income continues to be distributed to unitholders.
It added that IGBCR’s estimated gross distribution yield of about 7.5% provides a meaningful buffer against the higher tax burden, with net yields remaining attractive depending on investors’ tax profiles.
Positive outlook maintained
M+ Global maintained a positive outlook on IGBCR, citing resilient domestic economic conditions and sustained demand for premium office space.
The research house noted that Malaysia’s projected GDP growth of 4% to 5% in 2026 should continue supporting corporate leasing demand.
It also expects IGBCR to remain a key beneficiary of the ongoing migration towards high-quality office buildings in the Klang Valley, supported by its green-certified portfolio, diversified tenant base and continued improvements in occupancy and rental rates, which provide a clear earnings growth trajectory going forward.
