The Performance of Malaysian Real Estate Investment Trusts during Periods of Inflation and Elevated Interest Rates

Abstract

This study examines the impact of inflation and interest rates on the performance of Malaysian Real Estate Investment Trusts (M-REITs) during the period 2015–2025. Employing a panel fixed effects regression model with robust standard errors, the study evaluates M-REIT performance across four indicators: total return, dividend yield, price volatility, and net asset value (NAV) growth. The sample comprises all M-REITs listed on Bursa Malaysia over the study period, with macroeconomic data sourced from the Department of Statistics Malaysia (DOSM) and Bank Negara Malaysia (BNM). The empirical findings indicate that inflation, as measured by the Consumer Price Index (CPI), exerts no statistically significant influence on total returns, dividend yield, or price volatility, but exhibits a marginally positive association with NAV growth, suggesting limited inflation-hedging capacity operating primarily through asset value appreciation. In contrast, the Overnight Policy Rate (OPR) demonstrates a statistically significant positive relationship with total returns, dividend yield, and volatility, indicating that monetary tightening amplifies yield compensation demands and heightens market risk for M-REIT investors. Collectively, these results establish interest rate movements as the dominant macroeconomic driver of M-REIT performance, whilst inflation plays a comparatively peripheral role. The study contributes Malaysia-specific empirical evidence to the extant REIT literature and offers practical implications for investors, fund managers, and policymakers navigating inflationary and elevated interest rate environments.