Here's why CCT is "well-positioned" to face headwinds in the office sector

The firm's occupancy rate inched up to 97.4% in 3Q.

Near-term challenges are buffetting Singapore's office sector but CapitaLand Commercial Trust (CCT) is in a favorable standing to cushion the impact with its near-full portfolio occupancy and limited lease expiry profile, said RHB.

Despite a tough market in 3Q, CCT's portfolio occupancy rate edged up 0.2ppts QoQ to 97.4%, with about 155,000 sq ft of leases (55% new leases) signed.

New leases mainly came from the business consultancy, IT, media and telecommunications sectors.

With this, RHB noted that the REIT has about 1%, 6% and 13% of office leases (as a percentage of NLA) due for renewal in 2016, 2017, and 2018 respectively.

"We expect CCT to see slight negative rental reversions in some office buildings, which were signed during the peak of the office market," it said.

3Q16 DPU meanwhile, was up 8% yoy. According to RHB, results were in line with estimates, with DPU for 9M16 accounting for 76% of its full-year estimate.

3Q16 DPU increased 8% yoy, mainly on back of additional contributions from CapitaGreen with the completed acquisition of the remaining 60% stake on 31 Aug.

Consequently, the gearing of its portfolio increased to 37.8%, from 29.8%, as at end- 3Q16.

Borrowing costs remain stable at 2.5% (80% fixed borrowings) with a weighted average debt maturity of 3.5 years.