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3 Things About CapitaLand Commercial Trust That May Surprise Investors

CapitaLand Commercial Trust  (SGX: C61U) is one of the largest commercial real estate investment trusts (REITs) in Singapore.

CapitaLand Commercial Trust owns 10 Singapore properties and a 17.7% stake in the Malaysia-listed MRCB Quill REIT. On Monday, the commercial REIT uploaded a new presentation for the dbAccess Asia conference. The presentation had three slides that caught my eye – they contained information that may even surprise investors.

Falling office rental rates

The biggest story in 2016 for office rental in Singapore could be the abnormal spike in new office space entering the market. This has caused rental rates to be depressed as seen in the slide below.


Source: CapitaLand Commercial Trust’s presentation

The surprising bit is that the current Grade A office rental rate is about 12% away from its bottom during the global financial crisis. Today’s rental rate of $8.95 per square foot per month is also below the rental rate of $9.55 recorded at the bottom of the euro-zone crisis.

The lowest Grade A office rental rate seen in Singapore since 2002 is $4.48 per square foot, which was recorded during the post dot-com bubble and SARS period in 2003.

Rental rates will be under pressure

CapitaLand Commercial Trust’s occupancy rate has fluctuated between 94.7% and 99.5% over the past five years.


Source: CapitaLand Commercial Trust’s presentation

Despite the changes from quarter to quarter, the REIT has rarely recorded a decline in its average gross rent per month over that period. The rare occasions were in the latest two quarters in which the REIT’s rental rates declined from a high of $9.22 in the third quarter of 2016 to $9.20 in the fourth quarter of 2016 and then $9.18 in the first quarter of 2017.

Not just commercial

The name CapitaLand Commercial Trust suggests that the REIT is solely about commercial properties. But there’s more to its portfolio.


Source: CapitaLand Commercial Trust’s presentation

CapitaLand Commercial Trust owns a 60% interest in Raffles City. Because of that, the REIT has 17% of its gross rental income coming from retail and another 10% coming from hotels and conventions. Together, around 27% of CapitaLand Commercial Trust’s gross rental income comes from outside the commercial space.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.