05 Sep 2013 12:15 by Religare Institutional Research | BT Invest

Developers keen to offload hard-to-sell property are bringing back rental guarantees as a way to entice reluctant buyers without having to slash prices. Some shop units at the mixed-development Novena Regency offer a 4 per cent guarantee, a recent newspaper advertisement showed.

The Straits Times understands that some shop units at Icon @ Pasir Panjang, also a mixed development, will soon have a rental guarantee tacked on too. A rental guarantee means the developer is giving a buyer the certainty of rental income for a predetermined period, usually two years. This saves the buyer from having to look for a tenant, particularly in the coming few years when economic uncertainty and a rising supply of homes and shop space may drive up vacancy rates.

This could mark the start of the return of rental guarantees said SLP International. With guarantees, a developer can attract investors to buy units without having to lower prices significantly. A 4 per cent rental guarantee for a S$7,000psf shop unit would work out to at least S$280 psf per year or S$23 psf pm. CBRE said it is hard to assess whether this rent is higher than expected as shop rents vary widely based on size, location in the development and other factors.

http://www.btinvest.com.sg/property/local/developers-offering-rental-guarantees-for-retail-units-residential-next/