The REITs' vacancy rate has inched higher by 0.1 percentage point (ppt) q-o-q to 16.9%, a pandemic-era high, with completion of 10 million sq ft outpacing net absorption of 6.2 million sq ft. “Net absorption was only 7.3 million sq ft in 1H2022, a far cry from 19 million sq ft seen in 4Q2021. More tenants are sub-leasing their underutilised office space and sub-lease availability rate has increased 20 basis points (bps) q-o-q to a record high of 3.9% in 2Q2022,” note the analysts.
UOB Kay Hian (UOBKH) is keeping its “overweight” rating on the Singapore REITs (S-REITs) space with a preference for the US REITs listed on Singapore Exchange (SGX).
This came on the back of the US office market eking out a mild 1.4% y-o-y increase in asking rent in 2Q2022 despite a slowdown in leasing volume in 1H2022, according to analysts Jonathan Koh and Llelleythan Tan in their Oct 14 report. Leasing volume slowed for the second consecutive quarter and declined 9% q-o-q to 49 million sq ft in 2Q2022 (84% of pre-pandemic levels).
