It’s not all gloom and doom for office REITs, analysts say

Landlords are actively wooing tenants.

Office rents in Singapore are feared to dip this year on back of a massive supply glut, but analysts note that large landlords will remain fairly resilient in the face of the upcoming downturn.

A report by OCBC Investment Research said that most office REIT managers have been proactively engaging their tenants and negotiating on early renewals. This strategy will likely result in a high retention rate despite the upcoming supply surge, the report noted.

And though occupancy rates have slipped to 94.8% in the fourth quarter, OCBC said that space demand will partly be mitigated by demand from telecommunications, multimedia and technology (TMT) sectors.

OCBC is more positive on REITs with exposure to Grade B office space, such as Frasers Commercial Trust. This is because vacancy and rental rates of Grade B space has historically been less volatile than the Grade A office segment, OCBC said.
 

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