To Boost Occupancy

Return Of Inoculated Staff To Offices To Boost Occupancy

SINGAPORE – Some analysts believe that the return of vaccinated workers to offices starting from 1 January 2022 would help drive up physical occupancy for office buildings here, particularly those owned by Singapore REITs like CapitaLand Integrated Commercial Trust (CICT), reported The Edge on Saturday afternoon (30 October, SGT).

For instance, UOB Kay Hian analyst Jonathan Koh thinks that the return of inoculated staff beginning next year would result in better physical occupancy for CICT’s office buildings and bring relief to the trust’s downtown malls.

“CICT would benefit as the recovery broadens to offices and downtown malls in 2022,” he said.

Similarly, Citi analyst Brandon Lee agrees that the trust would benefit from the expected reopening of the economy during the first half of fiscal year 2022. He also expects CICT’s CapitaSpring would be nearly leased out during the last quarter of this year.

“On the office side, CapitaSpring is likely to be 90+ percent pre-committed at low-teens-rent by 4QFY2021, but elsewhere within selected parts of its portfolio, vacancy and negative reversion risks are present.”

Meanwhile, Maybank Kim Eng analyst Chua Su Tye said CICT’s risk-reward remains positive with its distribution per unit (DPU) recovery gaining traction from tenant expansion amidst the return of office demand.

Chua also foresees that income contribution for its office portfolio for the first half of fiscal year 2022 from assets – 6 Battery Road and 21 Collyer Quay – would support the REIT’s DPU recovery.

“We estimate divestment of One George Street could deliver S$85 million in gains at a S$2,900 psf transaction value. Further ahead, redevelopment plans are medium-term catalysts to support DPU upside,” he explained.

Upsides include an earlier-than-expected improvement in rental demand for its office space or retail units, better-than-anticipated rental reversions, and redevelopments or accretive acquisitions.

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