US office S-Reits could be on the cusp of a comeback
The worst could be over, with interest rates now edging downwards, and leasing demand and occupancy metrics improving across major office markets
Nathania Chew
[SINGAPORE] For years, Singapore-listed real estate investment trusts (S-Reits) that focus on office assets in the US have been pummelled – first by the Covid-19 pandemic and a subsequent shift in work trends, and then by rising interest rates.
But the worst could be over, with interest rates now edging downwards, and leasing demand and occupancy metrics improving across major US office markets.
“In recent quarters, we note that the US office market is showing clearer signs of stabilisation,” DBS analysts Derek Tan and Dale Lai said in a Nov 3 report.
Citing Cushman & Wakefield and JLL research, the analysts noted improvements in the US office market “driven by a rebound in tenant demand and a sharp pullback in new construction starts on the back of weak end-user demand”.
“After years of portfolio downsizing, occupiers are expanding again, particularly within high-quality, amenity-rich Class A buildings,” the DBS analysts noted. “Class A vacancy tightened by over 100 basis points year on year, underscoring the growing scarcity of quality space as tenants gravitate towards modern, well-located assets.”
Cushman & Wakefield and JLL research showed that leasing demand rebounded strongly in the third quarter ended September. Leasing volume was up 6.5 per cent quarter on quarter to 52.4 million square feet (sq ft), and leasing momentum has surpassed pre-pandemic leasing levels in 18 of 53 tracked markets.
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Employees are also reverting to spending more time back in office, with 56 per cent of employees of Fortune 100 companies being fully in-office in Q3 2025, compared to only 6 per cent in Q3 2023.
Looking ahead, JLL expects the office sector to remain on a multi-year tightening trajectory, driven by expanding corporate footprints, and accelerated transaction activity of US$32 billion – up 45 per cent year on year – with institutional capital cautiously re-engaging.
Prospects are further buoyed by expectations of US Federal Reserve rate cuts through to mid-2026, which should lower financing costs and enhance liquidity.
Improving fundamentals in the US office market should bode well for the three US office S-Reits – Prime US Reit, Keppel Pacific Oak US Reit (Kore), and Manulife US Reit – which are all currently trading at steep discounts of between 64 and 67 per cent to their book values.
Prime time
In particular, DBS is optimistic about the prospects for Prime US Reit, whose recent equity fund raising of US$25 million expanded its liquidity to US$120 million.
DBS has re-initiated their coverage Prime US Reit with a “buy” rating and a target price of US$0.35. On Tuesday (Nov 4), the counter closed 2.4 per cent or US$0.005 lower at US$0.20.
“With improving macro conditions and better office fundamentals, we believe Prime US Reit has moved past its worst times,” the analysts said.
Tan and Lai noted that Prime US Reit’s expanded liquidity provides sufficient capital for the Reit manager to undertake ongoing capital expenditure, support tenant incentives, strengthen liquidity and provide for higher payouts to unitholders.
They added that this allows the manager to have a higher payout ratio of 50 per cent, with projected distribution per unit (DPU) of S$0.0123 for FY2026, compared to a projected DPU of S$0.0022 for FY2025.
Prime US Reit is slated to release its results after the close of trading on Nov 11.
Optimism over Prime US Reit could also help to lift Kore and Manulife US Reit from the doldrums.
The manager of Kore reported on Oct 28 that its portfolio occupancy remained stable at 88 per cent, supported by strong leasing of 168,542 sq ft – accounting for 3.5 per cent of net lettable area – in Q3 2025.
Kore posted positive rental reversion of 9.6 per cent for the first nine months, largely driven by a renewal lease with a US federal government agency at One Twenty Five in Dallas.
The Reit manager expects to restart distributions in H1 2026, with payout expected in H2 2026.
Meanwhile, Manulife US Reit is slated to release its results on Nov 5 before the market opens.
DBS’ coverage on Kore and Manulife US Reit remains suspended.
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