Suntec REIT bullish amidst office rents upturn

Suntec City's relatively lower rents of $10 to $11 psf/month could lure more tenants.

Suntec Real Estate Investment Trust’s (REIT) could retain its bullish performance amidst the expected multi-year upturn in office rents, DBS Equity Research said.

“As CEO Mr Chan Kong Leong orchestrates the sustained turnaround of Suntec City Mall, spot office rents maintain their upward trajectory and underlying distribution per unit (DPU) improves, we believe more investors and other sell-side analysts will become convinced that Suntec is undervalued,” they explained.

According to DBS, passing rents at the mall which is around $10 to $11 psf/month are significantly lower compared to competitor suburban malls with rates ranging from $17 to $18 psf/month.

With this, DBS thinks that Suntec’s move to rehash its tenant mix and its strategies such as placing children stores next to playgrounds could result to higher foot traffic, tenant sales, and improving rents.

In addition, OCBC Investment Research thinks that Suntec REIT could still grab some opportunities from some of its additional net leasable area (NLA) at selected areas of Suntec City Mall.

Also read: Suntec REIT's NPI up 2% to $123.7m in H1

Meanwhile, Jefferies Singapore thinks that although rising office rents and the rising retail NLA could uplift the firm’s revenue, it will be offset by lower capital top ups.

The firm’s NPI grew 2% YoY to $123.7m in H1 2018 from $121.3m. Its profit rose 2.3% to $130.8m.

By late June, Suntec REIT’s Singapore office portfolio enjoyed an overall committed occupancy of 99.8%. The committed occupancy for Suntec City office improved to 99.7%.