WITH over 799,000 residents in Singapore having received at least one dose of the Covid-19 vaccine, the government has announced last Wednesday, more relaxation of workplace arrangements. From April 5, up to 75 per cent of staff can return to the workplace at any one time, an increase from the current 50 per cent. In addition, work from home will no longer be the default and split-team arrangements are also no longer mandatory.

As three quarters of the office community return to the office, we can expect to see higher footfall and usage of existing office spaces, compared to the earlier phases of the circuit breaker.

Listed on the SGX today are six S-Reits that have significant exposure to office properties in Singapore (defined by the combined value of the Reit's Singapore-based office assets as a percentage of its total portfolio value). The six have a combined market cap of over S$35 billion, forming almost a third of the overall S-Reit sector. These S-Reits trade at an average price-to-book ratio of 0.9 times and have an average distribution yield of 5 per cent, as shown in SGX's latest S-Reits & Property Trusts Chartbook.

By exposure to office assets in Singapore, the six S-Reits are: Keppel Reit (76.2 per cent of total portfolio value), Mapletree Commercial Trust (63.9 per cent), CapitaLand Integrated Commercial Trust (62.7 per cent), OUE Commercial Reit (59.5 per cent), Suntec Reit (55.1 per cent), and Frasers Logistics & Commercial Trust (20.1 per cent).

Keppel Reit manages over S$8.2 billion Grade A commercial assets in Singapore, Australia and South Korea. It has in December 2020 announced its proposed acquisition of 100 per cent interest Keppel Bay Tower in Singapore, a Grade A office building located in the HarbourFront/Alexandra submarket of Singapore. The property, which is expected to be DPU-accretive and has a 98.0 per cent committed occupancy rate, is also Singapore's first commercial development to be fully powered by renewable energy and certified the BCA Green Mark Platform (Zero Energy).

The Reit's overall top three tenants by business sector are banking, insurance and financial services, government agency, and technology, media and telecommunications. In total they represent 63.8 per cent of its portfolio committed net lettable area.

Mapletree Commercial Trust's portfolio comprises five properties in Singapore with a combined portfolio value of over S$8.7 billion, and four among the five have office properties.

The Reit noted that its newly acquired Mapletree Business City Phase 2 (MBC II) property has provided resilience and an enlarged exposure to the burgeoning technology sector from 5.1 per cent to 19.3 per cent in gross rental income. MBC II has a committed occupancy of 99.4 per cent and is expected to be financially accretive and anchors the Reit's control over the Alexandra Precinct.

CapitaLand Integrated Commercial Trust, considered to be the largest proxy for Singapore's commercial real estate market, has over S$14.0 billion out of its S$22.3 billion assets under management, in Singapore office and integrated development properties.

Its Singapore office properties have a 95.1 per cent portfolio occupancy rate, above the Singapore core CBD occupancy rate of 93.8 per cent. In Q4 2020, it saw 86 per cent of its new committed Singapore office leases coming from the financial services sector and noted that it had achieved positive rent reversion for FY2020.

It also observed more office community returning in early January 2021 at 43 per cent levels, compared to under 30 per cent in September 2020 when workplace arrangements were relaxed in Phase 2.

The Reit expects to see more demand coming from Chinese technology companies and non-bank financial services firms. Management also expects rental to turnaround by H2 2021 alongside limited Grade A office supply this year. SGX RESEARCH