Reit-owned malls more likely to forgo higher rents for right tenant mix

[SINGAPORE] For Singapore-listed real estate investment trusts (S-Reits), rent increases are tempered by longer lease terms, a need to curate tenant mixes to drive foot traffic, and a focus on keeping their tenants’ businesses viable.

These considerations set them apart from private commercial landlords, who may act more freely in setting rents, said analysts.

Their comments come amid mounting concerns over surging retail rents.

Headlines have spotlighted businesses facing steep rent hikes. Flor Patisserie, a local bakery, announced plans to shut its doors in April 2025, after its landlord raised the rent of its shophouse unit by nearly 60 per cent. The food and beverage (F&B) sector also saw a record number of closures last year, even as large China retailers expanded their footprint in malls.

Analysts said such sharp increases in rent are more typical among private landlords or in prime locations within malls. They also noted that strata-titled properties and shophouses operate under different motivations from institutional landlords.

According to real estate consultancy Cushman & Wakefield, prime retail rents in both the Orchard and suburban areas have slightly surpassed pre-pandemic levels.

The prime monthly rent for the Orchard area rose from S$35.77 per square foot per month in 2019, before the Covid-19 pandemic hit, to S$35.83 psf in 2024. In suburban areas, the prime monthly rent rose from S$31.76 psf in 2019 to S$32.90 psf in 2024.

However, there is no publicly available breakdown of rent rates for commercial properties between malls managed by S-Reits and private landlords, such as shophouses and strata malls.

Rents not ‘main priority’ for S-Reits

Rents are “not always the main priority” of S-Reits as they place greater importance on tenant curation, said Sulian Tan-Wijaya, the executive director of retail and lifestyle at real estate consultancy Savills Singapore. On the other hand, private landlords tend to vary rent depending on their own strategies and objectives, and are more flexible with concepts and operating hours, she added.

The structural differences in lease tenure also play a role. Private landlords often offer short leases of up to two years, while malls under S-Reits tend to sign tenants on longer terms of at least three years, with renewal options. This locks in rent levels and contributes to rental stability at malls managed by S-Reits, said Carmen Lee, head of investment research at OCBC.

Nevertheless, the changing habits of consumers, as well as the increasing cost of running a business, can contribute to the perception that rents are rising faster, said analysts. They pointed out that the cost of manpower and utilities have also increased alongside rent, even as Singaporean shoppers go overseas or online to stretch their dollar.

“When sales are down, every cost, including rent, would naturally be high by comparison,” said Tan-Wijaya.

The chief executive officer of Lendlease Global Commercial Trust Management, Guy Cawthra, said all malls have a spread of rents across their property, depending on the unit size, location and amenity, such as F&B or healthcare. There will “undoubtedly be competition for tenants for the best space” in the best malls, which “naturally” drives up rents, he noted.

The trust is the manager of Lendlease Global Commercial Reit, which counts 313@Somerset, Parkway Parade and Jem among its retail properties in Singapore.

Managing considerations 

S-Reits agreed that it was in their favour to ensure that tenants remain supported with sustainable rents.

A spokesperson from CapitaLand Integrated Commercial Trust (CICT) said that it aims to strike a balance between supporting its tenants’ growth and keeping its malls relevant to the needs of shoppers, while delivering long-term sustainable returns to its unitholders.

CICT’s retail portfolio includes prime malls such as Ion and Raffles City Singapore, as well as suburban malls such as Tampines Mall and Bukit Panjang Plaza.

CICT works with tenants on their leasing arrangements to support their business needs. This includes tracking tenants’ occupancy cost, which is the total rent as a percentage of total tenant sales. Its occupancy cost has remained below 19 per cent over the past seven years, with tenant sales consistently outpacing rent increases.

Similarly, Cawthra said that Lendlease is “highly aligned” with its tenants. “We want them to succeed, (and we want to) maintain high occupancy and continue to provide a vibrant retail offering for our shoppers.” To that end, Lendlease monitors its tenant sales performance and supports them when required, such as through marketing and promotions.

A spokesperson for Frasers Centrepoint Trust (FCT), which manages 10 properties, mostly suburban malls, said that the trust “constantly curates and refreshes (its) tenant mix” based on consumer trends, as well as concept relevance and long-term viability of the tenant’s business.

The manager of Suntec Reit has taken a similar approach, introducing youth and family-oriented concepts at Suntec City to transform the mall into an “experience hub” rather than a “shopping destination”.