Valuations for office Reits lag counterparts, but re-rating may face uncertainty

OFFICE real estate investment trusts (Reits) have been some of the more unloved asset classes in the Singapore market, with the sub-sector trading at a steep discount to its book value.

Reits that derive their revenue predominantly from the office sub-sector are trading at over a 50 per cent discount to their book value on average, dragged by weakness from those with overseas assets in the US and Europe.

By comparison, the average price-to-book (P/B) ratio for the S-Reit sector is around 0.7.

While the situation is not as dire for office S-Reits with mainly local assets, they too have been laggards in terms of their trading valuations.

Keppel Reit trades at around a 35 per cent discount to its book value, while others such as OUE Reit and Suntec R…