As of June 2022, office-using employment increased by about 1.6 million (+4.8% YoY), and there were 1.06 million (+3.2%) more office-using workers than before the pandemic began. The US job market remain healthy and this has spurred many companies to add office space to house a larger workforce.
Leasing activity picked up in 1H22 with stronger demand coming from the financial, professional services and healthcare sectors. Physical occupancy across the portfolio is at c.50% as more tenants implement their return-to-work plans. With in-place rents c.5.3% below asking rents, PRIME’s portfolio is primed for more positive rental reversions.
Maintain BUY, and DDM TP lowered from US$1.00 to US$0.88.
DDM-TP lowered from US$1 to US$0.88 as we trim our FY22e-FY24e DPU by 1-2%. Our COE nudged up from 9.6% to 10.55% on higher risk-free rate assumption and market risk. The current share price implies FY22e/FY23e DPU yield of 11.4/11.6%. PRIME is our top pick in the US office sector for greater tenant exposure to STEM/TAMI sectors and the resiliency of its portfolio. Catalysts include improved leasing and a greater return to the office. PRIME is also trading at an attractive 25% discount to book.