Positive rental reversions could boost CapitaLand Commercial Trust

A boost in the core Grade A office rentals can also uplift CCT.

Firm rental reversions could await CapitaLand Commercial Trust (CCT) amidst limited new office supply, OCBC Investment Research (OIR) said.

Moreover, OIR’s outlook that core Grade A office rentals will continue to get a boost from its current levels, which could also uplift CCT.

“Singapore’s office market continues to gain traction, as core Grade A CBD office rents rose 3.5% QoQ to $10.45 psf/month in Q3 2018,” they noted.

Also read: CapitaLand Commercial Trust NPI climbed 37.3% to $80.40m in Q3

According to CCT, their portfolio occupancy rose to 99.2% in Q3 from 97.8% in Q2 as Asia Square Tower 2 (AST2) saw a strong uplift in occupancy by 6.2 ppt to 98.1%.

“The main elephant in the room would be the potential income vacuum once HSBC’s lease extension ends in Apr 2020,” OIR commented. “We believe a large scale refurbishment or redevelopment would be the likely outcome.”

In Q3, CCT’s net property income jumped 37.3% YoY to $80.40m from $58.56m backed by the contributions from Asia Square Tower 2 (AST2) and Gallileo which were acquired in November 2017 and June 2018, respectively.