The ongoing economic recovery will likely drive Grade A office rentals to rise by more than 25 per cent in two years. This is according to the latest property report by Swiss-based investment bank Credit Suisse.
The bank said that it expects rent to hit $12 per square foot (psf) for super prime office space, such as the Marina Bay Financial Centre, by 2012.
Meanwhile, rentals for Grade A office space and prime office space are expected to hit between $10.50 and $11.50 psf, and $9 psf respectively in two years, the report added. Prime Grade A office rents are currently hovering at about $8 psf, as of the second quarter of this year.
Capital values, on the other hand, will remain flat till year-end but are expected to trend upwards going forward, said the bank.
Benefiting from such gains are the office-backed real estate investment trusts (Reits) and Credit Suisse said that it is positive on Prime A office Reits.
The bank upgraded CapitaCommercial Trust (CCT) to “outperform” from “neutral” with a new target price of $1.63, compared to the previous $1.37. CCT is sitting on a cash pool of $750 million and is likely to invest it into high-yielding assets, said the bank.
The Reit counts Raffles City, One George Street and Six Battery Road as some of its prime office properties.
Credit Suisse has also upgraded K-Reit, which overlooks properties such as One Raffles Quay and Prudential Tower, to “outperform” on the back of a strong balance sheet and healthy portfolio.
The Reit is also likely to undertake some acquisitions – possibly the MBFC – the bank added.
Source : Today – 27 Sep 2010