Keppel Pacific Oak US Reit portfolio occupancy to remain above industry average

UOBKH expects a small occupancy dip in the first quarter of 2025 before recovering.

Keppel Pacific Oak US Reit’s (KORE) portfolio occupancy is expected to remain above average as the government’s mandated work-from-office would underpin office space demand recovery, according to UOB Kay Hian (UOBKH).

However, UOBKH expects a small occupancy dip in the first quarter of 2025 before recovering to 88-89% by end-2025 and a rental reversion to range from -5% to +5% in 2025.

Moreover, KORE’s assets in US tech hubs contribute more than 60% to net property income. Despite a potential slowdown in the tech sector, UOBKH forecasts office demand in these markets will continue to grow.

As for DBS Group, the analytics company said green shoots emerging with KORE are seeing a stronger year in leasing volumes but the dividend payout is still a year away.

“We note that KORE’s overall portfolio occupancy rates tend to be more stable compared to other US peers. Close to two-thirds of its 13 properties have achieved occupancy rates of close to 90%,” DBS said.

However, DBS has cautioned of expected vacancies at The Plazabuilding (83.3% occupied) and Westmoor Center (93.8%) in 2025, posing vacancy risks.

Whilst the “worst may be over” for KORE, DBS said the likely yearlong wait for dividend resumption could delay buying interest, keeping the stock trading sideways for now.

“Looking ahead, KORE’s focus should be on managing occupancy rates, which will increase cash flows, rather than rental reversions,” DBS added.

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