Suntec braces for a tough year as retail, office rents dip

Lease renewals are under threat in FY16.

Suntec REIT is facing a double whammy of dropping office rents and weakening retail performance this year, according to analysts.

A report by CIMB commended Suntec’s steadily growing retail performance in the fourth quarter but warned that lease renewals might be under.

At Suntec City Mall Phase 3, the REIT reported that overall committed passing retail rent was $12.04psf per month, lower than the targeted $12.59psf/mth due to the ongoing retail headwinds.

However, overall retail portfolio occupancy inched up to 98% in the fourth quarter, as Suntec City managed to lease out an additional 1.6% of its space.

“ We think that there could be some uncertainty from FY16 retail renewals,” CIMB said.

Meanwhile, RHB feared that Suntec’s large exposure to the office market will dent its net property income in coming quarters, despite the stable occupancy rates at its properties.

“Though occupancy rates for Suntec REIT’s office portfolio remained stable at c.99%, we note that leases secured for the quarter fell c.4% QoQ. Given the pessimistic outlook within the office rental market, we think that its office rents would be impacted further till 2017,” RHB said