As reits are public company, they owe it to the shareholders to increase DPU year after year. That way, the managers of the reits can also get more performance fees. But who are the ones really paying for the increase in DPU? It's those people renting to do business! I've heard stories of rents increasing from 5k to 8k in those malls that are in the heartland managed by one of the listed reits. How are people going to make a living when the next time their rental are renewed, there's a jump of 30 to 60% increase? It's just not sustainable.
Even when a building is not managed by a reit, as the price of the rental in a reit manged building increases, it causes a trickle down effect to all the neighboring areas. The landlord in a non-reit managed building must be thinking that, hey, just across the road, those guys can charge so high, so why can't we do the same? So up and up the rental rates spiral, and down and down the margins of the business goes. It's just crazy when maybe 30-40% of your profits are all given to the landlord and passed on to the reits.
This will eventually end up very badly. The party will end when the rents are revised so high that few would dare to take up the space. Honest hardworking entrepreneurs who are out to make a decent living would be hard pressed to set up business. Everyone suffers. Including, eventually, the shareholders.
I know there are many ways that the reits can increase DPU without raising rental rates. I'm just ranting the pervasive idea of a reit always working to increase the rental at all cost, without regards to the human cost behind those numbers. How would you feel if your boss, in the pretext of accounting to the shareholders, decided to reduce your salary so that the company's share price can increase?