Manulife US REIT Sees Downtrend

Manulife US REIT Sees Downtrend In Office Occupancy

USA – The portfolio occupancy rate of Manulife US REIT (MUST) declined from 91.7 percent and 90 percent in Q1 and Q2 2022 respectively to 88.1 percent during the 3rd quarter of the year, according to its latest operational updates published on Wednesday morning (2 November, SGT).

Nonetheless, MUST’s manager explained in a filing with the Singapore Exchange (SGX) that the occupancy of its US office portfolio surpasses the 80.5 percent average for Grade A office buildings across the United States, citing Q3 statistics from Jones Lang LaSalle (JLL).

The “operational updates show that key gateway office assets are slowly stabilising, with a bottom likely by year’s end,” said RHB Group Research analyst Vijay Natarajan in a research note published on Wednesday.

“Management expects occupancy to stabilise at current levels, with rent reversions to stay positive. While there are challenges in gateway cities offices — on the back of transition to a hybrid working model — it has been priced in, with Manulife US REIT trading at a distressed valuation of 0.5x P/BV and approximately 15 percent yields,” he added.

Aside from that, Manulife’s manager revealed that office rental reversion increased by 4.3 percent during the period under review. However, portfolio weighted average lease expiry (WALE) dipped to 4.9 years in the third quarter from 5 years in Q2 2022.

Furthermore, the Singapore-listed real estate investment trust (REIT) signed about 61,000 sq ft of office leases in Q3 2022. Of this, 56.8 percent are made up of new office leases. Year-to-date, the REIT has inked about 254,000 sq ft of office leases, which account for 4.7 percent of MUST’s overall net leasable area (NLA).

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