Manulife US REIT: Physical occupancy of office properties remains low

Manulife US REIT entered a deal to acquire Park Place, an office campus consisting of two class A office buildings in Chandler, Phoenix, in November 2021. Credit: Manulife US REITManulife US REIT entered a deal to acquire Park Place, an office campus consisting of two class A office buildings in Chandler, Phoenix, in November 2021. Credit: Manulife US REIT

Manulife US REIT (MUST) has seen low physical occupancy of its U.S. office properties, with a recovery to only around 34 percent in early April, from an average of around 20 percent for 2021, the REIT said Monday. 

The REIT made the comment in a filing to SGX Monday with answers to shareholders’ questions before its annual general meeting (AGM), in response to a question on factors weighing on the unit price. On Tuesday, the REIT’s units closed at US$0.64, off highs of around US$1.052 touched in early February 2020 early in the Covid-19 pandemic.

MUST said office REITs in general are trading at a discount to book value. 

“Since the start of the pandemic in 2020, workers have been working from home,” the REIT said. “Decision makers are taking longer with regard to their leasing requirements as workers are slowly returning to office.”

The REIT said investors are taking a “wait-and-see” approach on how the hybrid model of working from both home and the office plays out. In the U.S., decisions on returning to the office are very company specific, MUST noted.

Occupancy of the portfolio has not yet recovered to pre-Covid levels, MUST noted, citing levels of 91.7 percent to 93.4 percent since the start of the pandemic.

“That said, we have started to see signs of green shoots in U.S. office with an increase in leasing volume, higher rentals and longer lease tenure,” MUST said. “Overall, there is still a limited supply of new office buildings and some positive signs for rent growth. Transaction volumes vary depending on the location.”