While a flood of new office space is coming on stream this year, Keppel Reit is so bullish about the market that it could even raise rents.

Mr Tan Swee Yiow, chief executive of the trust's manager, told a half-year briefing yesterday that tenants pre-terminating their leases was not a threat, but "an opportunity".

"Due to the quality of our portfolio, we are able to find replacement tenants at generally higher rentals," he added.

"Therefore, in a cynical way, the pre-termination actually gives us more opportunities to improve our rental for one-time and recurring income because our portfolio is almost full."

Mr Tan's bullishness is supported by many analysts, who expect office rents to recover after many quarters of decline. Premium rents in the central business district rose in the second quarter for the first time in nine quarters, according to Cushman & Wakefield.

The trust's high expectations come in spite of the lower property income and distribution per unit in the second quarter.

Distribution per unit for the three months to June 30 was 1.42 cents - an 11.8 per cent drop from 1.61 cents in the same quarter last year.

Net property income fell 1.7 per cent to $31.9 million.

The trust manager attributed the decline in income mainly due to the absence of income from the office block at 77 King Street, Sydney, which was divested in January last year, as well as lower income contribution from Bugis Junction Towers and lower one-off income.

Quarterly earnings per unit was 0.83 cent, down from 1.06 cents a year earlier, while net asset value per unit came in at $1.41 as at last month, falling from $1.44 as at the end of last year.

Keppel Reit had assets of about $8.3 billion, comprising eight premium office properties in Singapore and Australia. The Singapore properties are Marina Bay Financial Centre, One Raffles Quay, Ocean Financial Centre and Bugis Junction Towers. Its Singapore portfolio occupancy rate is at 99.8 per cent.

"With our strong occupancy, we can be a bit relaxed in terms of choosing between occupancy and rental rates. We will still proactively renew our leases, but we will work harder to see if we can do better rental rates going forward," said Mr Tan.