Better malls, pricier stalls: REITs pulling up everyone else’s rents

Is there a bully in the market?

Real estate investment trusts (REITS) look like they’re responsible for shop rent swells, a study by MTI reveals.

Malls owned by single non-REIT landlords are experiencing relatively lower rental growth than malls under REIT, but even then rents are leveling up across the whole retail market because major players are leading increases.

MTI attributes high rentals for REITs to their malls’ physical characteristics, implying that REITs have better facilities going for them.

“In particular, REIT managers may have been selecting malls of certain characteristics to acquire. These could be observable...such as location or proximity to the nearest MRT station,” the study says.

Here’s more from the report:

Specifically, after controlling for observable mall characteristics like AEIs and distance to the nearest MRT station, the level of rents in REIT-owned malls was not statistically different from
that in single-owner malls. Furthermore, the difference in rental growth also narrowed considerably.

In addition, among the malls which were acquired by REITs, there is no evidence to suggest that rents increased as a result of the REIT acquisition. In particular, after acquisition, the rents in REIT-owned malls were not statistically different from the rents in malls yet to be acquired by a REIT.