Singapore restaurateurs expand regionally amid soaring rents, labour shortages, and shrinking consumer spending in SG

Independent Singapore

7 days ago

JOHOR BAHRU: Singapore restaurateurs are turning to other parts of the region amid soaring rents, labour shortages, and shrinking consumer spending in the city-state, according to the South China Morning Post (SCMP).
Food and beverage (F&B) businesses across Singapore have been shutting down at the fastest pace in almost 20 years. Last year, more than 3,000 F&B outlets shut down — the highest since 2005, when 3,352 outlets closed.
In the first half of this year alone, 1,404 closures were recorded, only slightly below the 1,611 seen during the same period last year.
In fact, government data showed that an average of 307 establishments have closed due to high costs and fewer diners this year, which included Eggslut, Manhattan Fish Market, and Burger & Lobster, as well as Chinese hotpot chain Haidilao.
SCMP also noted the closure of Crystal Jade La Mian Xiao Long Bao's 20-year-old outlet at Holland Village and the Michelin-starred Poise on Teck Lim Road. See also The story of how You Tiao Man's business flourished amid COVID-19
One restaurateur from Singapore, 56-year-old Govinda Rajan, opened his first Malaysian outlet of Mr Biryani and is already eyeing expansion in Johor Bahru. Meanwhile, his Singapore outlets in Little India and Siglap are struggling. 'Don't talk about profit margins anymore,' he said. 'Surviving is the priority now.'
Keith Koh, a 35-year-old gastropub owner who opened a Muslim-friendly branch of Lad & Dad in Kuala Lumpur in May, said that lower operating costs there gave him breathing space and helped remind him that he's an entrepreneur. 'In Singapore, sometimes I forget why I'm doing this because I get lost chasing margins due to the high overheads,' he said.
'I lost track of the passion, the fire, the adrenaline I was burning out every other year, but going to Malaysia gave me that sense again,' he added.
While F&B business owners mentioned that some ingredients are more expensive in Malaysia, they told SCMP's This Week in Asia that significantly lower rents and labour costs make it easier to maintain profit margins. They also noted Singapore's tight restrictions on hiring foreign workers and the low local interest in service jobs, which have made operations more difficult.
Temasek Polytechnic's Diploma in Culinary and Catering Management course manager Geoffrey Tai said more local F&B owners have been eyeing regional expansion over the past 12 to 18 months amid high costs in the city-state.
'Contrast this with Malaysia, where rental, utilities, and manpower are significantly cheaper, and you start to understand the appeal,' he said, adding that while pricing power is lower there, operating costs are too, which makes the numbers 'work out more attractively'.
In addition, a YouGov survey of over 4,035 Singaporeans showed that 26% plan to cut back on dining out, while 20% said they will spend less on food delivery.
The food scene is under even more pressure as F&B outlet openings continue to surge — over 3,790 new eateries opened last year, followed by another 1,964 in the first half of this year.
Singaporean chef-owner Bjorn Shen said many newcomers in Singapore's F&B scene wrongly believe they can make a 30% profit when, in reality, most are lucky to get 5% to 7%. He added that eight in 10 are losing money, with most F&B businesses in Singapore closing within two years.
'For 5% to 7% profits, you should be thanking your lucky stars and kissing the feet of whoever you worship,' he said. 'We have more restaurants here than we have people to feed,' he added.
Meanwhile, Mr Shen, who recently opened NEP! in Penang and Baba G's in Bali, said profit margins in those cities can reach up to 20% and 30%, with entry-level staff in Indonesia costing about a fifth of Singapore's rates. /TISG
Read also: Knight Frank: F&B surge in S'pore could hurt profitability, waste resources, and destabilise the retail sector