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Future Of 5.5M SF In U.S. Office Space Under Debate By Singaporean REIT

A Singapore office REIT with 5.5M SF of properties across the U.S. is evaluating the future of its portfolio as rising vacancies begin to eat at returns.

Manulife US Real Estate Investment Trust reported a decline in portfolio occupancy from 90% at the end of June to 88.1% at the end of September, according to CoStar. An unprecedented slowdown of lease renewals as well as downsizing by existing tenants is partly to blame, the group said earlier this month.

1750 Northwest Pennsylvania Ave. in Washington, D.C., is among the REIT's office properties.

REIT executives and board members have been tasked with reviewing a variety of options, which could include divesting some properties and buying others, according to Singaporean news reports referenced by CoStar. Citigroup Global Markets Singapore will act as the financial adviser for the review.

Future acquisitions could include varying asset classes in U.S. markets outside of where the group currently operates. Already, the REIT has confirmed plans to convert space in a New Jersey office building to coworking space, according to CoStar. 

Manulife US REIT is among a vast number of office owners that could see occupancies fluctuate as companies reckon with a slower-than-expected return to the office made worse by tightening margins. 

Daily office utilization rates were still 50% below pre-pandemic norms as of early November, according to Seeking Alpha, and office REITS were among the worst-performing major property sectors in 2022, with declines of nearly 40%.  

In a bid to trim operating costs, executives at Meta will pony up $2.4B to get out of office leases, according to Motley Fool. Lyft and Salesforce are also planning to shed office space, per The Wall Street Journal.

CORRECTION, DEC. 1, 9:52 A.M. CT: A previous version of this story contained CoStar-reported information about space in an office building that would be converted to coworking. This article has been updated to reflect the correct location of that property.