Why are US Office REITs still giving above 10% dividends

In the past 2 weeks, 2 of my larger holdings - KepPacOak and PRIME recorded their ex-dividends.

For background, KepPacOak gave out 2.5 US cents in Dividends while PRIME gave out 2.4 US cents in dividends. This translated to 15% and 20% in dividend yield based on their share prices.

From 30.5 US cents, KepPacOak has dropped 3 US cents to 27 US cents. While PRIME fell from 18.5 US cents to about 16 US cents. Both declines matched their dividend amount, with KepPacOak having a slightly larger decline. Of course I would have been happy if their decline after ex dividend would have been less than the dividend amount.

Fear in the US Office Commercial Space

Besides the China property downturn, US commercial space is facing a falling vacancy as well. This is why US commercial REITs are now yielding double digits.

Personally, I think Pacific Oak as the manager for the KepPacOak REIT should be doing fine. Their leverage ratio is still in the high 30s range, with no downward revaluation done. However, there is a need to keep watch for the developments in USA. The amount of US office vacancy is the guage we have to look at because it is signalling that US is in fact going towards a recession. The trend to return to work at office seems not to have bucked the falling vacancy rate.

As a result, the glut in office real estate supply issue is an explanation to why US reits are now giving double digit dividend yields in the global investing climate.