UOBKH favours SGX-listed US office Reits as corporate giants mandate return to offices
Big boys like Amazon and Boeing want their employees in the office five days a week, heralding a boost to leasing volumes
AS MAJOR companies mandate a return to the office and sign larger and long-term leases, UOB Kay Hian (UOBKH) is positive on Singapore-listed US office real estate investment trusts (Reits).
The brokerage noted that corporate giants like Amazon, JPMorgan, Boeing and Tesla are demanding that employees work five days a week at the office. More companies are also enforcing minimum office attendance hours.
That is boosting the need for more office space to accommodate returning workers, it pointed out.
UOBKH analyst Jonathan Koh said: “Long-suffering US office Reits have exhibited nascent signs of recovery. Leasing volume has picked up and tenants are more willing to commit to larger and long-term leases.”
He cited data-tracking cell phone signals that showed that physical occupancy had, as of October 2024, recovered to 83.2 per cent of pre-pandemic levels.
Moreover, the US federal government’s push for return to office work provides impetus for the private sector to follow suit, Koh said, adding that ending remote work is an early priority for the Trump administration.
“Overwhelmingly attractive valuations beckon,” UOBKH said of SGX-listed US office Reits, reiterating its “overweight” call for the sector.
These counters are trading at a 2026 distribution yield of 22.5 per cent. Comparable US office Reits listed on the New York Stock Exchange – such as Boston Properties or Cousins Properties – are trading at an average distribution yield of 4.06 per cent, Koh noted.
UOBKH named Singapore-listed Keppel Pacific Oak US Reit (Kore) and Prime US Reit as its top picks with a “buy” rating for both, assigning Kore a target price of US$0.32 and Prime US Reit a target price of US$0.33.
Data from real estate player CBRE points to sustained leasing momentum, with the sector’s Q3 FY2024 leasing volume having risen 11.5 per cent year on year to reach 86 per cent of pre-pandemic levels, Koh said.
“Successful implementation of the work-from-office model by large corporations such as Amazon, JPMorgan and AT&T paves the way for other companies to likewise switch to the same model,” said Koh. Furthermore, companies that downsized prematurely would need to add on office space to accommodate their returning workers.
Kore provides a 2026 distribution yield of 19 per cent, said UOBKH, which believes its portfolio occupancy will remain above the industry average, although he expects it to “hover sideways” at 88 to 89 per cent in Q4 FY2024, and then fall slightly in Q1 of FY2025 before recovering by the end of FY2025.
Meanwhile, Prime US Reit provides “attractive” distribution yields of 2.3 per cent for 2025 and 25.9 per cent for 2026. It is undergoing several “notable leasing discussions” that could boost its occupancy levels, Koh said.
One risk for this sector, however, is higher-for-longer interest rates, he added.
Units of Kore closed US$0.005 or 2.4 per cent higher at US$0.215 while Prime US Reit finished flat at US$0.168 on Friday.
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Copyright SPH Media. All rights reserved.
