Keppel REIT debt outlook upgraded
The agency said the ratings had improved to stable following the REIT's investments in a half share of 8 Chifley Square in Sydney, 8 Exhibition Street in Melbourne and the Old Treasury building in Perth.
"The rating outlook is stable, reflecting Moody's expectation that Keppel REIT will continue to generate stable cash flows from its portfolio, driven by steady occupancy levels and positive rental reversions," Moody's said.
"Moody's also expects Keppel REIT to maintain its financial discipline when pursuing growth and to keep its credit profile within targeted parameters."
But despite the upgrade, Moody's said there were cautionary headwinds because of the weakening outlook for the office sector.
"We remain cautious on Keppel REIT's continued expansion into the Australian office market due to growing headwinds from negative pressure on white-collar employment in Australia, which has resulted in rising vacancy rates.
"Nonetheless, the trust's exposure to Australia post-acquisition of 8 Exhibition Street is less than 15 per cent of its total investment property value, and provides diversification." It said Keppel's Australian properties had high occupancy rates and long-weighted lease expiries of about 12 years.
Office landlords warn that incentives are rising in rental contracts to entice tenants as the national vacancy rate is forecast to move above 10 per cent.
Frequently Asked Questions about this Article…
Moody's Investors Service upgraded Keppel REIT's debt outlook to "stable" after the trust expanded across Australia and Singapore over the past year. The agency cited recent investments in Australian assets as a factor in the improved outlook.
Moody's said the upgrade reflects its expectation that Keppel REIT will continue to generate stable cash flows driven by steady occupancy levels and positive rental reversions, and that the trust will maintain financial discipline and keep its credit profile within targeted parameters.
Moody's specifically referenced Keppel REIT's investments in a half share of 8 Chifley Square in Sydney, 8 Exhibition Street in Melbourne, and the Old Treasury building in Perth as part of the expansion underpinning the outlook change.
A "stable" outlook from Moody's indicates the agency expects the REIT's credit profile and cash flows to remain steady in the near term. For investors, it suggests lower near-term credit risk relative to a negative outlook, though it doesn't guarantee performance or rule out future changes.
Moody's warned of cautionary headwinds from a weakening office sector in Australia, noting negative pressure on white‑collar employment and rising vacancy rates—factors that could put pressure on office rents and landlord returns.
After acquiring 8 Exhibition Street, Moody's said Keppel REIT's exposure to Australia is less than 15% of its total investment property value, which the agency views as providing geographic diversification rather than concentration risk.
Moody's noted Keppel REIT's Australian properties have high occupancy rates and long weighted average lease expiries of about 12 years, which supports more predictable cash flows.
The article notes office landlords are offering rising incentives to attract tenants as the national vacancy rate is forecast to exceed 10%. For investors, higher incentives and vacancy could compress rental growth and returns, though Keppel REIT's high occupancy and long lease expiries may help mitigate short‑term pressure.
Call 1300 880 160
Start a chat
Schedule a call
