Manulife US REIT (MUST) occupancy dipped slightly to 90.9% for 3QFY2021 ended September, down from 91.7% at 1HFY2021 and 92% in the first quarter.
That said, MUST notes that occupancy increased to 91.6% post-3QFY2021, as of Oct 25.
On the occupancy dip, MUST’s chief investment officer Patrick Browne points to a “long-term tenant with a long-term lease” in Atlanta choosing to terminate their lease for an entire floor, which formerly housed their IT department.
In its quarterly operational update on Nov 3, MUST notes that weighted average lease expiry (WALE) also dipped to 5.1 years for the quarter, from 5.3 years in 1HFY2021.
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62.5% of MUST’s leases have in-place rental escalations of 2.7% per annum.
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For the first nine months of 2021, MUST executed about 453,000 sq ft of leases, or about 9.7% of MUST’s portfolio. This is up 76% from some 279,000 sq ft in FY2020.
Of this figure, approximately 149,000 sq ft leases were executed in 3QFY2021.
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Meanwhile, gearing stands at 42.0% as at 3QFY2021, holding steady from 42.1% in the previous quarter.
The weighted average interest rate, too, was maintained at 3.01% for the quarter, compared to 2.99% in the previous quarter.
“How do I view the outlook of our portfolio? After the darkness of last year, here comes the sun,” says MUST CEO Jill Smith.
Limited supply is set to improve 12-month rent growth in MUST’s markets, notes the REIT. CoStar projects 12-month rent growth of negative 0.4%, compared to earlier projections of negative 1.2% in July 2021 and negative 2.5% in April 2021.
“It’s still a tenant’s market, not a landlords’ market, but certainly the pendulum is swinging away,” adds Smith.
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US office green shoots are growing strongly, notes MUST, pointing to higher leasing volume and longer tenure, TIs and free rent starting to ease, increasing base rents and net effective rents, and subleasing declining for the first time since Covid-19.
Shares in Manulife US REIT closed 1.5 US cents higher, or 2.14% up, at 71.5 US cents on Nov 2.
Photo: MUST
