We expect Suntec REIT (SGX:T82U)’s office portfolio to be impacted by the technology sector’s slowdown – moderating rent growth with a slight uptick in vacancy. This, coupled with the sharp interest cost impact from a spike in rates, should weigh on Suntec REIT's share price.
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Office demand drivers slowing down.
The technology, media and telecommunications (TMT) sector is the largest occupier of Suntec City Office Towers (~38% of FY21 rents) and has also been the key source of new leasing demand in recent years. Suntec City Office Towers is the largest asset in Suntec REIT's portfolio (~30% of income) and currently has a high committed occupancy of 99.6% and rent reversion (YTD) of 3.3% as at 3Q. For FY23F, ~27% of leases are due for renewal and we expect committed occupancy could fall to ~98% levels with flattish rent reversions.
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Suntec City Mall’s performance should remain relatively steady while the convention segment is expected to rebound strongly in FY23.
Divestments likely in FY23.
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Above is an excerpt from a report by RHB Securities Research. Clients of RHB may be the first to access the full PDF report @ https://www.rhbtradesmart.com/.
