MTI busts myths of REITs not driving up retail rents

[newborn1000]

It’s just a misconception, asserts report.

Contrary to popular belief, a study released by the Ministry of Trade and Industry’s Economics Division asserted that REIT mall acquisitions are not driving up retail rents.

The study noted that while REIT-owned malls indeed charge more for space, they nonetheless have better physical characteristics compared to single-owner malls.

“After controlling for the observable characteristics of the malls such as location and the asset
enhancement initiatives (AEIs) taken, we find that the rents in REIT-owned malls are not
statistically different from rents in single-owner malls,” noted the report.

The study also asserted that there is no evidence to indicate that rents in REIT-acquired malls increased due to the acquisition.

Here’s more from the study:

Indeed, a simple analysis of the location of the malls shows that REIT-owned malls tend to be better located (e.g., in core central region) and are closer to key amenities like MRT stations. It would thus be important to control for the impact of such characteristics on retail rents in the malls, in order to isolate the impact of REIT ownership on rents.

This study finds that the higher levels and growth rates of rents observed in REIT-owned malls may have given rise to the perception that REITs are driving up retail rents in Singapore. Nonetheless, this phenomenon appears to be largely driven by the better physical characteristics of the REIT-owned malls.

- See more at: http://sbr.com.sg/commercial-property/ne...0Vvwk.dpuf

Havent been contributing, so here you all go =)

[investor101]

It’s just a misconception, asserts report.

Contrary to popular belief, a study released by the Ministry of Trade and Industry’s Economics Division asserted that REIT mall acquisitions are not driving up retail rents.

The study noted that while REIT-owned malls indeed charge more for space, they nonetheless have better physical characteristics compared to single-owner malls.

“After controlling for the observable characteristics of the malls such as location and the asset
enhancement initiatives (AEIs) taken, we find that the rents in REIT-owned malls are not
statistically different from rents in single-owner malls,” noted the report.

The study also asserted that there is no evidence to indicate that rents in REIT-acquired malls increased due to the acquisition.

Here’s more from the study:

Indeed, a simple analysis of the location of the malls shows that REIT-owned malls tend to be better located (e.g., in core central region) and are closer to key amenities like MRT stations. It would thus be important to control for the impact of such characteristics on retail rents in the malls, in order to isolate the impact of REIT ownership on rents.

This study finds that the higher levels and growth rates of rents observed in REIT-owned malls may have given rise to the perception that REITs are driving up retail rents in Singapore. Nonetheless, this phenomenon appears to be largely driven by the better physical characteristics of the REIT-owned malls.

- See more at: http://sbr.com.sg/commercial-property/ne...0Vvwk.dpuf

Havent been contributing, so here you all go =)

As a REITs investor, it is good news that the REITs can get higher rentals for us.

One man's meat is another man's poison.

Anyway, I don't really believe the MTI's report. From what my business contacts tell me, rents tend to go up by double-digit percentages during each renewal. If the tenants get really really lucky, rents either freeze or drop by less than 5%. If average unlucky, go up by 20%. Either that, or landlord demands a flat rental plus a percentage of the sales. Sales, not profit. That means the poor tenant has to disclose to the landlord confidential info such as daily sales.

The tenant is completely naked and exposed, and has no ability to negotiate besides packing up and leaving, which is often done only as a last resort. The playing field is weighted very heavily in favour of the landlord.

The system is exploitative. So, invest more in REITs when their share price is down. I did so for stocks like CIT and Suntec REITs. Will probably reduce exposure to REITs when the government pass laws that seek to curb profiteering by landlords and developers.

[Temperament]

It’s just a misconception, asserts report.

Contrary to popular belief, a study released by the Ministry of Trade and Industry’s Economics Division asserted that REIT mall acquisitions are not driving up retail rents.

The study noted that while REIT-owned malls indeed charge more for space, they nonetheless have better physical characteristics compared to single-owner malls.

“After controlling for the observable characteristics of the malls such as location and the asset
enhancement initiatives (AEIs) taken, we find that the rents in REIT-owned malls are not
statistically different from rents in single-owner malls,” noted the report.

The study also asserted that there is no evidence to indicate that rents in REIT-acquired malls increased due to the acquisition.

Here’s more from the study:

Indeed, a simple analysis of the location of the malls shows that REIT-owned malls tend to be better located (e.g., in core central region) and are closer to key amenities like MRT stations. It would thus be important to control for the impact of such characteristics on retail rents in the malls, in order to isolate the impact of REIT ownership on rents.

This study finds that the higher levels and growth rates of rents observed in REIT-owned malls may have given rise to the perception that REITs are driving up retail rents in Singapore. Nonetheless, this phenomenon appears to be largely driven by the better physical characteristics of the REIT-owned malls.

- See more at: http://sbr.com.sg/commercial-property/ne...0Vvwk.dpuf

Havent been contributing, so here you all go =)

As a REITs investor, it is good news that the REITs can get higher rentals for us.

One man's meat is another man's poison.

Anyway, I don't really believe the MTI's report. From what my business contacts tell me, rents tend to go up by double-digit percentages during each renewal. If the tenants get really really lucky, rents either freeze or drop by less than 5%. If average unlucky, go up by 20%. Either that, or landlord demands a flat rental plus a percentage of the sales. Sales, not profit. That means the poor tenant has to disclose to the landlord confidential info such as daily sales.

The tenant is completely naked and exposed, and has no ability to negotiate besides packing up and leaving, which is often done only as a last resort. The playing field is weighted very heavily in favour of the landlord.

The system is exploitative. So, invest more in REITs when their share price is down. I did so for stocks like CIT and Suntec REITs. Will probably reduce exposure to REITs when the government pass laws that seek to curb profiteering by landlords and developers.

Ha! Ha!
So far who is the BIGGEST LANDLORD in Singapore? And that include your HDB's rental for 99 years. Why not 30 or 60 years renewal rental lease? i predict it will be soon. It may not be in my lifetime, but it will happens as people can't afford 99 rental lease anymore.

[koh_52]

So far who is the BIGGEST LANDLORD in Singapore? And that include your HDB's rental for 99 years. Why not 30 or 60 years renewal rental lease? i predict it will be soon. It may not be in my lifetime, but it will happens as people can't afford 99 rental lease anymore.

60 yrs leasehold property already in the market recently...cant remember the project name, that retirement home somewhere at Jln Jurong Kechil.

Currently there are thousand of flat that have less than 60 yrs lease left..people who buy such flat will find it difficult to sell after they have finish their loan. WHY leh?
For flat with less than 60 yrs left. Max loan amt as well as the quantum of CPF fund for loan installment will be reduced as older the HDB flat.

[specuvestor]

I don't think it is prudent to have 60 years lease because it is possible to outlive the lease if u buy from the primary market, which is contrary to HDB basic intent

Then if u have to boot out those whose lease expired when they are in their 80s-90s... it is really gonna be a sorry affair. And then the same people who wants to get the benefits of higher HDB prices are likely to be the ones asking to socialise the cost.

[Singapore_guru]

MTI should do a research paper on the effect of selling JTC properties on industrial rents - conclusion will be different!

[Temperament]

I don't think it is prudent to have 60 years lease because it is possible to outlive the lease if u buy from the primary market, which is contrary to HDB basic intent

Then if u have to boot out those whose lease expired when they are in their 80s-90s... it is really gonna be a sorry affair. And then the same people who wants to get the benefits of higher HDB prices are likely to be the ones asking to socialise the cost.

Currently there are thousand of flat that have less than 60 yrs lease left..people who buy such flat will find it difficult to sell after they have finish their loan. WHY leh?

For flat with less than 60 yrs left. Max loan amt as well as the quantum of CPF fund for loan installment will be reduced as older the HDB flat.

Posted by Temperament - Today 03:26 pm
60 years lease will come to being in the future because people can not afford to pay anymore for 90 years lease.
What about people who are buying in the resale HDB markets?
Many flats are 60 or coming to 60 years left in lease, now.

But i believe in the end Singapore will catch up with Tokyo or New York in housing prices. By then who can afford to lease for more then a year or two? That's if Singapore is still an independent country.

[specuvestor]

Cannot afford? Like extending car loans to 100% for 10 years to make it "affordable"?

Those buying in secondary market is correlated but different from the primary market

[Temperament]

Yes, of course after 100% still can go on extending the credit limit, ma. That had been done by US and then what happened to their housing market? And what was the real source of the GFC?

Ah!..... the car loans. Do you know what is the maximum loan now in % of the value of the car?
Hint - My neighbour who was a 2nd-hand and // car importer was laughing all the way to the banks until the loan policy changed. He just had to close all his investments. Business is not lucrative anymore. No 100% loan, business can't survive with new car prices at minimum > 100K+. And like you said, all things are relative, used cars prices are affected too.

i think housing loan policy and rules/regulations have also changed now. But still not as bad as CAR LOAN POLICY lol!
Don't think the G wants the housing market to collapse. It's not to their advantage.
The car market may "collapse". Ordinary working class just can't afford the down-payment in cash. It's a plus for our G though if the market collapse. No? Go back to 100% loan again lol!
Ha! Ha!

[swakoo]

reckon there is an error in the title
MTI busts myths of REITs not driving up retail rents

Another way to bust the myth is to look at the historical retail rental trend:

[Image: sgpmallrentals93-2011_zpsb0bf6059.jpg]