Are investors overly pessimistic on office rents?

It’s not all gloom and doom out there, says CCT.

CapitaCommercial Trust’s management believes that market-watchers and investors are overly bearish on office rents, according to a report by UOB Kay Hian.

The report noted that CCT’s CapitaGreen enjoyed double-digit rental reversions in the quarter. Expanding tenants took up 167,000sf of space, exceeding the 148,000sf that was vacated, which translates to a 113% increase in demand.

Although office rents declined for the first time in two years in the second quarter, UOB Kay Hian believes that the long-term trends for the sector are still intact.

“We expect 2H15 rents to remain stable as the next surge of office supply will only arrive in 2H16/2017 that could result in a healthy correction (5- 10%). Beyond 2017, the supply remains meagre at below 0.6m sf that should lead to a pick-up in rental growth. Conversions of older office buildings into alternative uses would lend further support,” the report said.