Chart of the Day: Demand for prime-grade offices to outstrip supply

That's in the next 3 years.

According to CIMB, as at end-3Q13, about 77% of the total debt taken on by S-REITs was fixed rate and only around 10.8% of their total debt will be due for refinancing in 2014.

In addition, with S-REITs largely borrowing for periods of one to five years, CIMB expects them to continue enjoying low interest cost for any new debt taken
on over the next six months, assuming the Fed funds rate remains low.

Here's more from CIMB:

With the yield spread currently at 457bp compared to its historical average of 374bp, we believe that much of the downside risk from QE tapering has been factored in.

As the supply of prime-grade office space is expected to average 0.8m sf a year in the next three years compared with the historical average take-up rate of 1m sf per year, demand/supply is turning favourable for landlords.

We believe that rents have bottomed. We forecast that average Grade-A rents will rise 8% in 2014 (with a pre-leasing pick-up in 2H14) and 6% in 2015.

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