Keppel REIT Still Upbeat On Office Rental Despite Falling Occupancy

SINGAPORE – Keppel REIT’s manager said it’s “quietly confident” on positive news regarding office rental, even though the COVID-19 pandemic continues to affect staff’s return to their workplaces, according to local bourse filings on Tuesday afternoon (25 January, SGT).

As of 31 December 2021, the trust’s portfolio committed occupancy declined to 95.4 percent from 97.1 per cent in the prior quarter. On an annual basis, it fell 2.5 percentage points from the 97.9 percent seen on 31 December 2020.

Before the working from home (WFH) became the norm because of COVID-19 restrictions, Keppel REIT’s portfolio occupancy stood at 99.1 percent as of the end of December 2019.

“As the economy slowly reopens, we are seeing an increase in enquiries on the space, so we are feeling confident in trying to backfill these spaces. There’s actually a little bit of tailwind behind us as well,” said Keppel REIT’s CEO Koh Wee Lih during a briefing following the results announcement of the trust.

Keppel REIT’s manager’s Head of asset management Rodney Yeo stated that although the Omicron variant has led to some uncertainty, business sentiment has been seen to be improving as WFH is no longer the default.

“We’ve seen the number of tenants returning to the office increase swiftly to above 40 percent in recent weeks.”

“We’re getting some pretty good positive traction in terms of leasing… (and) we are actually quite quietly confident that we should be able to announce some good leasing news in the next 1 or 2 quarters.”

Aside from that, Keppel REIT’s manager recorded positive office rental reversions, at positive 2 percent for the H2 2021, and at positive 3 percent for the entirety of 2021.

In particular, rental reversions were up 2.8 percent for its Singapore office buildings, up 10 percent in Australia and 8.6 percent in South Korea.

On the leasing front, a total of around 2 million sq ft of office space, with an attributable area of 888,600 sq ft, were committed in FY2021. This included new and expansion leases from occupants across sectors, like financial services, technology, media and telecommunications, as well as manufacturing and distribution.

The majority of the office leases concluded were in Singapore, with average signing rent there at S$10.56 psf per month. Portfolio weighted average lease expiry (WALE) reached 6.1 years, with tenant retention rate at 62 percent for FY2021.