
OUE Commercial REIT has a 68% stake in One Raffles Place
OUE Commercial REIT saw its net property income surge by 18 percent year on year to reach S$56.6 million ($42.62 million) in the first quarter on the back of resilient Singapore office rents and the relaunch of its flagship hotel on Orchard Road.
Han Khim Siew, chief executive officer of OUE C-REIT’s manager, said rising rental income from the trust’s grade A office assets in the city-state’s downtown core and the full reopening of its newly renovated Hilton Singapore Orchard hotel were the trust’s main growth drivers for the period.
“Our high-quality CBD (central business district) Grade A office assets in Singapore continued to record high occupancy and positive rental reversion which provides resilient returns,” Han said during their earnings’ release last week.
OUE C-REIT is the latest property trust to demonstrate the benefits of investing in Singapore’s resilient office sector after CapitaLand Integrated Commercial Trust’s (CICT) late last month reported double-digit growth in net property income for the first three months of this year, with the Lion City likely to experience ongoing increases in leasing rates for grade A desk space at least through the end of next year, according to a report released by Savills on Monday.
Occupancy, Rents Up
The SGX-listed REIT, which owns seven commercial properties in Singapore and Shanghai, also booked a 15 percent jump in revenue last quarter, bringing in S$68.4 million compared to S$59.5 million a year earlier.

Han Khim Siew of OUE Commercial REIT
The trust sponsored by Singapore-listed developer OUE Ltd sources roughly half of its revenue from Singapore office assets including its 100 percent ownership of the office component of the OUE Downtown commercial complex in Shenton Way.
The REIT also has a 50 percent stake in OUE Bayfront and about 68 percent ownership in One Raffles Place, with both integrated developments located in the heart of the financial district. OUE Ltd is controlled by Indonesia’s Riady family, which also controls the country’s Lippo Group conglomerate.
“Supported by their prime locations and diversified tenant mix, OUE C-REIT’s core Grade A office assets are well-positioned to demonstrate resilience in 2023,” the manager said.
OUE C-REIT said committed occupancy in its Singapore office portfolio improved to 96.7 percent by the end of March, from 95.5 percent at the end of last year, while average passing rents rose 1.6 percent from the preceding three months to reach S$10.26 per square foot per month last quarter. The increase came in part from positive rental reversions of 6.7 percent.
While Singapore’s office upswing boosted the REIT’s income, that result was dampened by weak leasing in its Lippo Plaza retail and office complex in Shanghai, which saw its committed office occupancy drop to 75.2 percent in the first quarter from around 80 percent at the end of last year. Average passing rents for the central Huaihai Road property slid to RMB 8.71 ($1.26) per square metre per day last quarter.
Hotel Rebounds Sharply
With OUE C-REIT sourcing 48 percent of its revenues from hospitality and retail assets, the full reopening of its flagship 1,080-key Hilton Singapore Orchard hotel at the start of the year also helped improve its topline.
“The successful AEI completion and full opening of Hilton Singapore Orchard will be a growth engine for OUE C-REIT as Singapore’s tourism sector and business travel continues on the recovery path,” Han said.
After relaunching its 446-room Orchard Wing in January, the hotel’s revenue per available room (RevPAR) more than doubled to S$233 in the first quarter from just S$99 per key a year ago, when only the 634-room Mandarin Wing was operational. RevPAR in its 563-unit Crowne Plaza Changi Airport hotel also jumped 71 percent year on year to S$216 per room.
“While global economic conditions are highly uncertain and the hospitality sector’s recovery is also dependent on labour and cost challenges, OUE C-REIT’s hotel properties are well-positioned and expected to rebound to pre-pandemic levels barring any unforeseen circumstances,” the trust’s manager said.
Increased shopper traffic and tenant sales also helped Mandarin Gallery, the REIT’s high-end shopping centre inside the Hilton Singapore Orchard, to push up rents by 2.7 percent last quarter from the preceding three months.
Muted Rental Growth
Having maintained profitability during a quarter when economic turmoil cast dark clouds over other listed property trusts in the region, OUE C-REIT could face more challenging conditions during the remainder of this year, as Singapore’s office market shows signs of slowing.
Average monthly rents for grade A offices in Singapore’s central business district continued to rise in the first quarter, reaching S$9.59 per square foot per month, according to Savills. However, quarter on quarter growth rental growth slowed to just 0.2 percent, after leasing tariffs rose by 2 percent for the full year of 2022, according to Savills.
With some troubled tech firms in Singapore having handed back premises to their landlords during the first three months of this year, the city’s office market contracted by 471,000 square feet during the quarter, the property consultancy said. This net reduction in space leased contributed to a 1.7 percentage point increase in the city’s grade A office vacancy, which reached 7.4 percent at the end of the quarter.
Savills expects rental growth will soften to 2 percent for the full year of 2023, as vacancy rates continue to hover between 7 to 8 percent.
OUE C-REIT also cautioned unitholders that distributions this year are likely to suffer as the trust experiences higher borrowing costs.
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