WeWork’s Potential Bankruptcy

Singapore Office S-REITs Resilient Despite WeWork’s Potential Bankruptcy

SINGAPORE – The office portfolios of Singapore-listed real estate investment trusts (S-REITs) are still performing relatively well, even though major tenant WeWork warned that there’s a chance it could go bust, reported The Business Times on Sunday afternoon (27 August, SGT).

Notably, there are three S-REITs that are exposed to the New York-based coworking space operator: Suntec REIT, Mapletree Pan Asia Commercial Trust (MPACT), and CapitaLand Integrated Commercial Trust (CICT).

According to Jihye Lee, Associate Director of Research at the Singapore Exchange (SGX), WeWork was one of CICT’s top 10 office occupants in June 2023, with the flex office space provider contributing 2.4 percent of the SREIT’s overall gross rental income.

In spite of this, CICT saw higher contributions from its office properties. In fact, its net property income (NPI) and gross revenue from its office portfolio rose 14.8 percent and 19.6 percent respectively during the first six months of FY2023. The SREIT’s office assets also recorded a year-to-date rental reversion of 9.6 percent, surpassing its retail portfolio’s rental reversion of 6.9 percent.

Moreover, the occupancy level of CICT’s office portfolio edged up to 95.4 percent in Q2 2023 from 94.8 percent during the preceding quarter.

Meanwhile, Lee revealed WeWork accounted for 1.9 percent of Suntec REIT’s total monthly office gross rental income, as per its 2022 annual report. As of 30 June 2023, coworking space operators occupied about 3 percent of the SREIT’s office portfolio.

Despite this, Suntec REIT’s Singapore office properties are still performing relatively well. In H1 FY2023, its NPI and gross revenue from its office portfolio increased by 1.1 percent and 8.1 percent respectively thanks to higher occupancy and office rent at One Raffles Quay and Suntec City Office.

The SREIT’s office properties here were also nearly fully occupied at the end of the second quarter. While its overall occupancy in Singapore was very high at 99.3 percent, the occupancy rate of its office buildings in the core CBD was slightly lower at 94.8 percent.

Nonetheless, Suntec REIT’s office portfolio recorded 20 quarters of positive rental reversion and the figure reached 10.8 percent during the first half of FY2023.

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