Friday, June 25, 2010

REITs

According to CBRE, prime office rents finally picked up in the 2Q after a six-quarter slump. The average monthly prime office rent was $6.90 psf, up 3% from $6.70 psf in the previous quarter. The average monthly Grade A office rent was $8.45 psf, rising 5.6% QoQ. Notably, the vacancy rate in the core central business district was 6.7%, which improves from 8.1% a quarter ago. Outside the CBD - in areas such as Orchard, Novena and Alexandra - rents remained stable in the past 2-3 quarters.

In view of the latest data points, we have become more optimistic about the take-up of new office space. There will be around 6.9m sq ft of new offices coming onstream between H2 this year and 2015, and just over 50% of that has been pre-leased. We reckon pent-up demand from MNCs will continue to support leasing momentum. For proxy to office recovery plays, one can consider 1) Fraser Commerical Trust (yield is 7.1%), 2) Suntec REIT (6.6%), 3) Capitacommerical Trust (6.2%) and 4) K-Reit (6%)

No comments:

Post a Comment