Maybank Kim Eng is maintaining its negative rating on all three Singapore office REITs.
Although 1Q results for the office REITs were in line and occupancies held up well despite weak market conditions, they were achieved at lower signing rents in general.
“We stay cautious on office REITs as the sector has just tipped over and is unlikely to bottom until 2018,” says lead analyst Derrick Heng in a Friday report.
Maybank said occupancy levels at Capitaland Commercial Trust and Keppel REIT held up well although this was achieved at broadly lower rents albeit still with positive reversions. Occupancy for offices at Suntec City dipped slightly too.
“We expect this resilience to be tested as a large amount of new office space gets completed,” says Heng.
Pre-commitment at Guoco Tower remained low at 18% and commitment levels at Marina One and Duo are expected to be fairly low as well.
To support headline yields, Keppel REIT has distributed proceeds from the sale of Prudential Tower for the third straight quarter and Suntec REIT has also cushioned the loss of income from Park Mall with more capital distribution.
As for financing, Capitaland Commercial Trust and Keppel REIT have locked in a large portion of their interest costs and now have 91% and 75% on fix rates.
With a smaller 66% of its debt fixed, Suntec REIT will benefit more from a decline in interest rates.
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Although 1Q results for the office REITs were in line and occupancies held up well despite weak market conditions, they were achieved at lower signing rents in general.
“We stay cautious on office REITs as the sector has just tipped over and is unlikely to bottom until 2018,” says lead analyst Derrick Heng in a Friday report.
Maybank said occupancy levels at Capitaland Commercial Trust and Keppel REIT held up well although this was achieved at broadly lower rents albeit still with positive reversions. Occupancy for offices at Suntec City dipped slightly too.
“We expect this resilience to be tested as a large amount of new office space gets completed,” says Heng.
Pre-commitment at Guoco Tower remained low at 18% and commitment levels at Marina One and Duo are expected to be fairly low as well.
To support headline yields, Keppel REIT has distributed proceeds from the sale of Prudential Tower for the third straight quarter and Suntec REIT has also cushioned the loss of income from Park Mall with more capital distribution.
As for financing, Capitaland Commercial Trust and Keppel REIT have locked in a large portion of their interest costs and now have 91% and 75% on fix rates.
With a smaller 66% of its debt fixed, Suntec REIT will benefit more from a decline in interest rates.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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