Office REITs no longer market darlings as rental growth slows

Prime rents have risen 19% since 3Q13.

Office REITs are ceasing to be market favourites after over a year of robust rental growth.

According to Barclays, prime office rents have risen 19% since the third quarter of 2013, and a the bumper 3.6mn sqft of office completions in the end of 2016 is expected to moderate rent growth.

“We do not expect rents to plunge in 2015 in anticipation of the huge but temporary wall of supply in 2016/17, but think rent growth will significantly slow down to 3% in 2H15 and potentially zero growth in 2016 and 2017 as the bargaining power shifts to tenants from landlords,” stated Barclays.

Barclays downgraded key REITs such as Keppel REIT, Mapletree Industrial Trust and CapitaMall Trust.