SGX Market Updates

Author: SGX   |   Latest post: Mon, 11 Dec 2023, 5:37 PM


REIT Watch - Positive Rent Reversions Recorded Across Singapore Office Market

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Singapore Grade A office rent and core CBD Occupancy

According to CBRE Research’s latest Singapore Occupier Sentiment Survey, office utilisation in Asia-Pacific outpaced that in Europe and the US. The average office utilisation rate in Asia-Pacific was about 65 per cent, compared to 50 per cent in both Europe and the US.

In Singapore, office utilisation was around 64 per cent with tech firms reporting a rate of over 80 per cent. In a recent article in The Business Times that cited the CBRE survey, it noted that while “there are dark clouds still lingering, the Singapore office market should remain resilient and steadfast for the rest of the year” and that given the strong fundamentals, the Singapore office sector will “remain relevant to sustaining the city’s economic growth and attractiveness to major corporates”.

SGX lists six S-Reits with exposure to Singapore-based office assets. Keppel Reit is a pure-play office S-Reit while CapitaLand Integrated Commercial Trust (CICT), Mapletree Pan Asia Commercial Trust (MPACT), Suntec Reit, OUE Commercial Reit and Lendlease Global Commercial Reit are diversified S-Reits with exposure to Singapore office properties.

Keppel Reit’s Singapore office portfolio saw valuations increase by 0.5 per cent as at June 2023, compared to December 2022. In contrast, its Australia office portfolio’s valuations dropped by 3.5 per cent across the same period. Occupancy rates continue to hold up in its Singapore offices – Ocean Financial Centre and One Raffles Quay at 100 per cent while Marina Bay Financial Centre and Keppel Bay Tower at more than 98 per cent.

According to CICT, grade A office rents in Singapore continued to climb albeit at a slower pace in the second quarter of 2023 and it expects rental growth to ease in the second half of the year. On the supply side, CICT noted that there is no gross new supply in the CBD Core area from 2023 to 2025. On the demand side, it sees healthy demand from private wealth and asset management companies, law firms, professional services and government agencies, but expects pockets of weakness in technology, cryptocurrency and consumer banking.

CICT’s latest Q2FY23 Singapore office occupancy rate dipped marginally quarter-on-quarter, from 96.7 per cent to 96.6 per cent. However, rental reversions for the year to date till June was positive at 9.6 per cent with retention rate at 91.7 per cent.

Similarly, MPACT saw positive rental reversions in its latest Q2FY23 update, with Mapletree Business Centre at 7.1 per cent and the rest of Singapore office properties and business parks at 8.9 per cent. Looking ahead, MPACT expects rents for business parks to remain flat or stable with minimal growth in 2023 despite the expected rise in vacancy, as new and good-quality business parks will command higher rental rates. 

Source: SGX Research S-Reits & Property Trusts Chartbook.

REIT Watch is a weekly column on The Business Times, read the original version.

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