US Office REITs - UOB Kay Hian 2024-10-09: The End Is Near For Working From Home

US Office REITs - The End Is Near For Working From Home

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US Office REITs | SGinvestors.io
  • Long-suffering US office REITs are finally seeing the light at the end of the tunnel. Leasing volume has picked up and tenants are more willing to commit to long-term leases.
  • New construction has petered out and occupancy could recover to pre-pandemic levels by 2027. Upcoming rate cuts would support a continuation of the recovery.
  • - Read this at SGinvestors.io -

Pick-up in leasing as confidence is restored.

  • Leasing volume increased 7% y-o-y and 15% q-o-q in 2Q24, reaching 90% of pre-pandemic levels. Demand bottomed out in 1Q23 and rose steadily over the next five consecutive quarters. Renewals accounted for 45% of leasing volume as tenants avoided incurring out-of-pocket build-out costs. Tenants have shown more confidence in signing long-term leases in recent quarters.
  • - Read this at SGinvestors.io -

Reaching a new equilibrium.

  • Major tenants have cut office space by an average of 11.4% over the past 12 months when their leases expire. 60% of leases were signed before the COVID-19 pandemic and are subject to future downsizing. Nevertheless, many tenants have reached their targeted office footprint.
  • Downsizing has gradually diminished as office space per employee stabilised at 147sf, down 9% from pre-pandemic levels. Some tenants have also started to expand their footprint.

Office construction at historic low.

  • Read more at SGinvestors.io.



Above is an excerpt from a report by UOB Kay Hian Research.
Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.



Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2024-10-09



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