In recent years, there has been a growing perception that Real Estate Investment Trusts (REITs) are driving up retail rents. Indeed, a casual comparison of retail rents in REIT-owned and other malls may have contributed to this perception, as rental levels and rental growth tend to be higher in REIT-owned malls. However, such a comparison does not take into account the fact that REIT-owned malls tend to have better physical characteristics (e.g., better location) and as such, can command higher rents.

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. 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.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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