Singapore-based office S-Reits report improved metrics and higher rents

SINGAPORE focused office S-Reits remain poised to benefit as more employees return to the office. The Urban Redevelopment Authority (URA) office rental index in the Central Region grew 1.6 per cent and for a second consecutive quarter in Q1 2022 driven by limited supply.

CBRE Research also expects Core Central Business District (CBD) rents to increase by 6.9 per cent year on year for the whole of 2022.

SGX lists 6 S-Reits with exposure to Singapore-based office assets. Keppel Reit : K71U 0% is a pure-play office S-Reit while CapitaLand Integrated Commercial Trust (CICT) : C38U 0%, Mapletree Commercial Trust (MCT : N2IU 0%), Suntec Reit : T82U 0%, OUE Commercial Reit : TS0U 0% and Lendlease Global Commercial Reit : JYEU 0% are diversified S-Reits with exposure to Singapore office properties.

Keppel Reit reported a 4.3 per cent year-on-year growth in distributable income for Q1 2022 mainly from its acquisition of Keppel Bay Tower last year.

Most of its new leases for Q1 2022 were in Singapore (Ocean Financial Centre, Marina Bay Financial Centre, and One Raffles Quay), with average signing rent for Singapore office leases at S$11.15 psf pm, higher than Singapore’s average core CBD Grade A office rents (S$10.95 psf pm).

CICT reported improved portfolio occupancy of 92.3 per cent in its Singapore portfolio and has seen a 9.3 per cent increase in rent reversion in Q1 2022.

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CICT most recently completed its acquisition of a 70 per cent interest in CapitaSky (formerly known as 79 Robinson Road) which has a committed occupancy of 92.9 per cent and net property income yield of 4 per cent.

MCT reported that its FY21/22 gross revenue from office/business park assets grew 1.9 per cent year on year driven by higher contributions from Mapletree Business City, mTower and MLHF. All its office/business park assets reported strong occupancy rates, with mTower observing significant growth from 75 per cent to 84.7 per cent.

Mapletree Anson closed its transitional vacancy as it reported full commitment. MCT expects positive leasing momentum for office/business park to continue through to the new financial year.

Suntec Reit saw its office committed occupancy strengthen to 97.5 per cent and recorded a 3.2 per cent increase in rent reversion for FY21.

The Reit noted income contribution from its Singapore office portfolio is expected to grow, driven by cumulative positive rent reversions achieved in the past 11 quarters and full impact of revenue from leases committed in 2021.

OUE Commercial Reit noted that average passing rents of its Singapore office properties were higher year on year, with OUE Bayfront hitting a high of S$12.49 psf.

Its office properties were observed to record higher valuations ranging from 0.2 to 7.5 per cent year on year, compared to its other segments.

Lendlease Global Commercial Reit completed its 100 per cent direct interest in Jem. Its Jem office component is fully leased to the Ministry of National Development on a 30-year master lease with a rent review every five years. SGX RESEARCH

The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the monthly S-Reits & Property Trusts Chartbook. Source: SGX Research S-Reits & Property Trusts Chartbook.