Keppel REIT's Ocean Financial Centre, in which a stake was sold to Allianz Real Estate in 2018. (Photo: REITsWeek)

COVID-19 has accelerated the adoption of remote working practices, and this will eventually lead to a drastic reduction in demand for offices as companies evaluate the necessity of leasing physical spaces.

As such, office REITs will eventually falter as an investment class as demand for office spaces weakens amid a proliferation of tools such as Zoom, and Microsoft Teams.

Such is the narrative that is increasingly gaining traction among some investors, a number of whom have shied away from pure-play office REITs in anticipation of a supply glut in office spaces.

A reflection of this sentiment can be seen in the average price-to-book value of office REITs, which has largely been lagging behind its peers in the retail REITs, industrial REITs and healthcare REITs segments.

In Singapore, office REITs have also been trading at a discount of approximately 20-30% to book value since the COVID-19 pandemic began, as seen in the Singapore REITs table.

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By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.