Separately, JLL has indicated that leasing momentum is expected to recover in 2H2025. Tenants’ requirements increased 5.8% q-o-q in 2Q2025 and are at the highest level since 4Q2021. JLL expects leasing activities to grow 5% in 2025. Office demand is expected to recover in 2H2025, driven by improved business sentiment as trade tension eases, positive work-from-office momentum, dwindling new supply and easing of downsizing.
During Brookfield Asset Management’s investor day on Sept 10, its management articulated that it expects employees to return to office, causing office demand to recover.
In a report dated Sept 11, UOB Kay Hian cites Trepp, a CRE loan and data analysis entity, which highlighted that the commercial mortgage-backed securities (CMBS) market saw a resurgence with issuance volume rising 35% y-o-y to US$59.6 billion in 1H2025, the strongest in 18 years. Office-backed CMBS of US$10 billion accounted for one third of new CMBS issuance in 1Q2025. Of course one of the reasons for CMBS issuance is because of the high rate of mortgage maturities this year.
Nonetheless, UOBKH says that the recovery is supported by “an expected decline in interest rates, which improves refinancing conditions and boosts leverage for new transactions.”
See also: UOBKH raises target price on Pan-United to $1.33 on Terminal 5 contract and healthy concrete demand
UOBKH is also very bullish about the Federal Reserve cutting rates, with a hefty 100 bps cut this month, October, December and January, taking rates down 3.25%. That could cause the US dollar to weaken considerably, but UOBKH does not mention this as a challenge for local retail investors.
This decline in the Fed funds rate would lower Prime US REIT’s average cost of debt to 5.2%, and Keppel Pacific Oak US REIT’s (KORE) to 4.8%. UOBKH has a buy on Prime US REIT with a target of 31 US cents, compared to its net asset value of 55 US cents as of end-June. RHB Bank also has a buy recommendation on Prime US REIT because its leasing activity has rebounded as has its occupancy rates.
UOBKH downgraded KORE on Sept 10 to a hold. KORE’s NAV was 70 US cents as of June 30. The downgrade is because operationally, KORE’s portfolio occupancy is expected to slip slightly to 86-88% by end-2025 due to known vacates of 174,000 sq ft. “We have recalibrated our assumed payout ratios to 25% in 2026, 40% in 2027, 55% in 2028 and a stabilised 70% in 2029,” UOBKH says.
