Suntec REIT’s Office Leasing

Re-Imposition Of WFH To Impact Suntec REIT’s Office Leasing

SINGAPORE – The office space leasing momentum of Suntec REIT is expected to slow down now that work-from-home (WFH) is back to being the default, reported The Edge on Thursday afternoon (30 September).

In a note published by RHB Group Research analyst Vijay Natarajan on Thursday, he wrote that the reintroduction of stringent safe management measures (SMM) will negatively affect Suntec City mall, and would likely slow down Suntec REIT’s office space leasing momentum in the short term.

However, Natarajan remains upbeat on the long-term fundamentals of the trust’s high-quality office portfolio. He also believes that Suntec REIT’s shares are deeply undervalued.

This is even though the occupancy rate of Suntec REIT’s office portfolio slid 1.1 percentage points to 95 percent during the 2nd quarter primarily because UBS moved out.

“However, we remain positive in our long-term outlook and expect the REIT to benefit from the ongoing flight to quality,” noted Natarajan.

He also believes that the underlying strength of the local office market is still strong. As a matter of fact, rents of core Grade A office space in Singapore’s central business district (CBD) edged up by 1 percent on a quarterly basis to S$10.50 psf per month, representing the first increase since Q4 2019.

Aside from that, he pointed out that Suntec REIT witnessed positive rental reversion during the first half of its 2021 financial year, and this trend is expected to continue for its entire fiscal year.

Furthermore, Natarajan revealed that Suntec REIT’S office capital values have held up well, as evidenced by the trust’s strong transaction activity.

For instance, Suntec REIT sold 2 office assets – a 30 percent stake in the 9 Penang Road office project and strata office units in Suntec City – at respective premiums of 6 percent and 9 percent on top of their latest valuations.

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