REITs have no impact on retail rents: MTI
Real Estate Investment Trusts (REITs) have no impact on retail rents, with malls’ location and enhancements driving up prices instead, a study finds.
SINGAPORE: Real Estate Investment Trusts (REITs) have no impact on retail rents, which are being driven up by the malls’ location and enhancements instead of their ownership.
This is according to a study conducted by the Ministry of Trade and Industry (MTI), following a growing perception that rental prices at retail malls acquired by REITs are rising at a faster rate.
After removing factors such as location and asset enhancement initiatives at malls, “we find that the rents in REIT-owned malls are not statistically different from rents in single-owner malls”, the report said.
“Furthermore, among the malls that are acquired by REITs, we find no evidence to indicate that the rents in these malls increased as a result of the acquisition,” it added.
The study, covering rental data from 35 REIT-owned malls and 76 single-owner malls between 2000 and 2013, followed inquiries over the impact of REITs during the Budget debate in March, when Workers’ Party’s Non-constituency MP Mr Yee Jenn Jong said that REITs are dominating the retail malls and are in a position to steeply raise rental prices.
“Nonetheless, (rental increase) appears to be largely driven by the better physical characteristics of the REIT-owned malls… like asset enhancements and distance to the nearest MRT station,” the MTI report said. It added that further analysis will be conducted on whether acquisition by REITs has improved the performance of retailers to justify higher rental prices.
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