Sunday October 5th, flight on the way back from Vietnam to Singapore
To the Rentiers they go - Are REITS Alright?
Premise and context
This post was first drafted probably around 2 - 3 years ago, but i never really got around to it. In its conception, this was an attempt to understand rent economies, and, as a lay person: starting with the actual “rent” industry of real estate. Intuitively, it seems wrong, but when bad things persist - there must be an underlying reason. What am i missing?
This came from a blend of honest curiosity and effort to temper an intrinsic disgust for predatory industries that, (in both financial jealousy and that a hypothesis that could run counter utilitarian net gain for societal good) shouldn’t exist.
Adjacent intolerables are Real estate agents and insurance, (to be clear, I dont hate the players, but the game. I have met some lovely people in these fields)
Today (in 2025), Rent seeking industries and high rents are even more topical - with it being the boogeyman for rising costs. Is it warranted? Well its a field i know very little about (and no one in my circle works in real estate).
I suppose much of the recent angst in this area boils down to one key thing, on the rising cost of living. So, much of this consideration comes from the position of what and how does the rent economy play in sustainably serving society and the economy?
some assumptions or thoughts came to mind as an uneducated non-real estate (and non-financial) person. These could be completely, off, but form the basis of my attempt to understand the nuances at hand.
First, appreciating the importance of rent and real estate: its an area that affects all aspects of economy, especially or lower value activites and land intensive (necessary things like food, healthcare, etc). Home, work, industry…where theres physical activity, there is demand for space.
Second , there are benefits to REITS: In the Singapore context, REITS tend to give good, stable returns. Investors prefer to put their money there. REITS are doing well https://www.businesstimes.com.sg/companies-markets/growth-in-reit-etfs-driven-by-continued-hunt-for-yield
Third, elucidating what i feel are numerous downsides:
- Shift of cash towards property and not innovation, especially in concentrated, urban cities
- REITS force property prices to rise and rental rates to increase, which triggers when there is a rejuvenation of preceding land
- REITs are monopolistic and high capital…
- Which breeds inequality, allows access for those with enough capital accumulation and cross a minimum critical mass threshold, but, as a polar opposite: locks out certain groups of society….
- …Which is fine if there are no crossover effects, but in effect those locked out from its benefits are instead at the mercy (renters), of the capital owners.
- These are intuitively unhealthy for an over-financialised system, obsessed with financial gain
Fourth, identifying and labelling where my gut-feel negativity stems from an overall economic perspective. I posit that there is less structural innovation (accrued for the long term, national), compared to export-led markets. (see the F***, marry, kill industry tier list)
Hearing the other side
Stumbled across a lightning rod of a post which prompted the completion of this psot. Written by a real estate professional looking to absolve the industry. https://www.linkedin.com/pulse/put-down-pitchforks-moment-hear-me-out-perspectives-singapore-yeo-bulnc/
Could my mind change?
Contention 1: Rental index has decreased I felt immediately gaslit by the use of nuanced metrics. Frankly, I didn’t investigate too deeply (Laziness on my part), but these approaches often mask hidden nuances. A clearer “has rental increased: yes/no” would be more apt (and the only normalising factor should be from the perspective if renters)
Assessment: Probably bad, but I’m too lazy to go into the methodology, not a good start to obfuscate though.
**Contention 2: Rental ratios are low
The author Refers to Occupancy Cost (OC) as a metric: That rates are low / stable as a total proportion of sales of that outlet: Well yes, but if revenue is increasing due to increase in prices (price/good or service); which seemingly, this point is moot. If the price per good or service has remained stable (which anecdotally, hasn’t), then I can accept this point more openly.
Assessment: Still bad
Contention 3: Rental Reversion: That rent need to go up to match the mortgage obligations of the new buyer The author notes rising rental rates need to be “fair” to New ownership, new loan, new rates - but skips the point that this still does not solve the overarching problem of capital agglomeration (and ability to buy or takeover a property) from breeding and encouraging ever rising cost of services and goods. (see 2)
Assessment: Still bad, although this is a systemic issue, probably one order higher than property developers
Contention 4: Growing the top line matters, and footfall helps The attribution of growing topline as the important (to keep up with, well you know, occupancy cost) is helped significantly by footfall. Possibly, but I do feel its very specific to industry.
Assessment: Maybe ok.. neither positive nor negative
Contention 5: There are other costs (no shit), labour is the real culprit, and diversifying a sophisticated retail experinece is hard I was not a fan of the Manpower argument: it is a total distraction from the main topic. It would be good to note if the manpower costs rising are a function of….guess what - paycheques going into residential rent.
The other point I would be on what “better” experiences could be. One could argue that a sophisticated, novel but incredibly premium experience that is less accessible is probably not the healthiest concept to feed into a society that already feels inequal.
That said, I can fully understand the rise of chain restaurants (described as “cookie cutter”), and the necessity for centralisation of functions.
Assessment: Redirection of the problem…
And the rest… The remainder of the articles were musings of Singapore’s retail competitiveness, value-add of mall operators, etc are directed and less towards the question of how the real estate market influences our society and economy for better or for worse.
Interesting for sure from an industry insight, was ore descriptive than argumentative.
Yup its still bad
The article was no doubt a good insight into a field I am completely unfamiliar with, but it seemed to reinforce my negative thoughts about the sector…
And so it continues…