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CNA
4 days ago
- Business
- CNA
Commentary: The tussle over retail rents in Singapore cannot go on like this
SINGAPORE: When small, often well-loved, businesses shut citing rising rental costs – as Flor Patisserie did when it announced its Siglap outlet was closing after a 57 per cent rent hike – online reactions of sadness and anger tend to follow. Then come comments that this is just how the free market works: Rents go up when demand is high, and those who can't pay must move on. And it is also the market that will punish landlords when no one else is prepared to fork out an unrealistic asking rent. But that is more myth than reality. Many landlords can afford to wait for higher-paying tenants, often large chains, and may even prefer prolonged vacancies over leasing to independent businesses at lower rates. Amid this age-old tussle, we need to ask: How big is the problem and what retail environment does this create? THE ECONOMICS BEHIND THE HIKE On the surface, the data suggests that retails rents have not seen a dramatic increase. Based on the Urban Redevelopment Authority (URA)'s Retail Rental Index, rent in the Central Region has remained relatively flat since 2020, even trending slightly downward from a recent peak of 101 points in the last quarter of 2019 to 78.7 points in the first quarter of 2025. But there are two limitations to the data: The Retail Rental Index only reflects executed leases, not asking rents. If landlords are holding out for higher-paying tenants and choosing to leave units vacant, these rates won't show up in the index. The index also only tracks retail space in the Central Region and may mask sharp changes elsewhere, particularly in suburban neighbourhoods undergoing gentrification. From a landlord's and an economic perspective, raising rent is rational. In Singapore, rental income isn't just about steady cash flow; it directly influences a property's capital value. Higher rents can unlock better financing terms and increase resale potential, especially in areas where commercial space is scarce. In neighbourhoods like Siglap, where demand stays strong and supply is limited, even small rent hikes can significantly boost valuation. For example, if a landlord increases monthly rent by a relatively modest 10 per cent from S$10,000 to S$11,000, the estimated property value could go from S$3 million to S$3.3 million. This offers a powerful incentive to increase rents especially in anticipation of refinancing or resale. But what's rational on a spreadsheet often feels very different on the street. What adds value to an asset may subtract vibrancy from a neighbourhood, which can counterproductively hurt the retail experience and footfall. WHAT WE LOSE WHEN SMALL BUSINESSES GO Big chains and franchises may bring consistency and scale, and that makes it harder to offer a distinctive experience. Small businesses cannot compete on price alone, so they must offer something money can't buy. They reflect the needs, quirks and rhythms of the communities they serve. When small shops are run by founders in person, they often offer the rootedness and warmth that make a place memorable – they may know our names and our usual orders. Besides displacing existing small businesses, aggressive rent strategies also raise the barrier to entry for aspiring entrepreneurs, especially those without deep capital reserves. For many local founders, whether just starting out or choosing to remain small by design, the ability to secure a foothold in a neighbourhood is essential. There is a risk of losing intangible pieces of neighbourhood culture or killing the entrepreneurial spirit of homegrown businesses in the long run – and of neighbourhood offerings that start to look similar, just as we sometimes bemoan the 'cookie-cutter' shopping malls. INTERVENTION IS POSSIBLE This is by no means a challenge faced only by Singapore. Some big cities have stepped in to protect small businesses from being pushed out of their districts. In New York City, the pending Small Business Jobs Survival Act aims to give commercial tenants more bargaining power in negotiations and the right to renew leases on fair terms. In Seoul, the government has taken a more area-based approach. Some areas have been declared officially Commercial Area Preservation Zones, where rents are controlled and financial incentives offered for landlords who retain traditional or small-scale tenants. While such policies do have their challenges, including potential trade-offs in market efficiency and difficulties in evaluating their impact within broader urban regeneration efforts, they demonstrate that intervention is possible. SHOULD THE GOVERNMENT INTERVENE? Singapore's stance on commercial rents has long been laissez-faire with an emphasis on free markets. But intervention does not have to mean drastically deviating from these principles, provided it is scoped, spatially precise and transparently implemented. In addition to zoning or conservation tools that Singapore already uses, rent control or lease protection can be confined to specific precincts, such as URA's Identity Nodes already recognised as distinctive neighbourhoods or for specific types of businesses. These could include subsidies, right-of-renewal clauses or escalation caps to prevent excessive volatility. Singapore Tenants United for Fairness (SGTUFF), a cooperative of business owners, has suggested linking rent increases to the Consumer Price Index (CPI). This approach is worth exploring, as an appropriate peg could stabilise lease renewals while still preserving landlords' real returns. The CPI is a reasonable and transparent benchmark, reflecting general inflationary trends and cost-of-living pressures. Whether it is the most suitable peg, however, depends on context. In some cases, CPI alone may not capture the dynamics of high-demand retail corridors; in others, it may offer a fairer basis for negotiation. The key lies in identifying the right variation, such as pegging rent to the CPI plus a modest premium, or tailoring adjustments based on location or tenancy profile. Such frameworks could introduce predictability and fairness, without unduly distorting market mechanisms. Sceptics may argue that rent control depresses investment or viability. But this isn't blanket rent control. Not every retail rent hike warrants intervention. It's about being deliberate about where and how to intervene: Done right, it is a retail conservation mechanism, not market distortion. Such measures could also give small shops support and the breathing room to adapt during periods of volatility or transition beyond lease renewals, such as neighbourhood redevelopment or broader economic stress. Another suggestion has been to penalise landlords who leave retail spaces vacant for too long. While the market already penalises vacancy through lost rental income, some landlords, especially institutional or well-capitalised ones, may still hold out for premium tenants or higher rents. A modest vacancy surcharge or a tiered property tax is also worth considering. This isn't about punishing legitimate vacancy but about discouraging prolonged withholding of space in areas where demand from smaller or independent businesses exists but is priced out. This has been trialled or is under consideration in some cities. In San Francisco, an annual Commercial Vacancy Tax applies to ground-floor retail units left vacant for more than 182 days a year, with rates escalating in subsequent years. Early reports point to modest reductions in vacancy rates, though enforcement challenges remain. URBAN DESIGN AND BETTER DATA None of these ideas seeks to override market forces, only to temper them with better foresight, equity and care. Urban design has a role to play too. More flexible zoning could allow for underused office space to be repurposed as retail or community space, expanding room for independent businesses. Monitoring rents more locally would allow earlier smarter interventions. While URA's REALIS platform provides useful aggregated insights, it does not consistently offer rental data at the street or unit level for commercial properties. As a result, hyper-local rent spikes often lead to displacement. More transparent, timely and granular monitoring would support more responsive planning and targeted action. NOT JUST WHAT THE MARKET CAN BEAR At the end of the day, the tussle over retail rental hikes is not just about economics. It's about the kind of city we want to live in. Planners, policymakers and landlords need to shape this answer. It doesn't require abandoning market logic, only applying it with more sensitivity and nuance. Sometimes that means intervention. Sometimes it means asking not just what the market can bear but what the community can.
CNA
23-06-2025
- Business
- CNA
Are mainland Chinese F&B brands in Singapore driving up rents and squeezing out local businesses?
SINGAPORE: With commercial rental costs in Singapore making headlines and generating animated discussions online, alongside reports of food and beverage shops shuttering, some segments of the public have pointed to businesses of mainland Chinese origin as the culprit. A tenant cooperative has called out foreign players, while several local businessmen interviewed by CNA were convinced that a perceived influx of mainland Chinese retailers setting up shop here has raised rents. But Chinese F&B brands operating in Singapore and approached by CNA denied paying higher rents; while analysts offered a more nuanced picture with one saying it was simply "market dynamics" at play. 'These Chinese players seem to have (an) endless supply of ammunition, of cash,' said Mr Andy Hoon, chairman of Bosses Network, an informal group made up of local businessmen. If the rental is expected to be between S$30 and S$40 per square foot, Singaporean tenants would likely offer around S$36 to S$38, he said. A Chinese brand, however, might offer S$45, he claimed. Private mall operators in Singapore typically do not share data on winning bids for shop spaces. Mr Hoon said his contacts from China are of the mindset that they would need to offer higher rental to win bids, and that they are willing to do so to test out the market in Singapore – which they view as a stepping stone to the rest of the region. Mr Andrew Tjioe, president and CEO of TungLok restaurant group, said: 'I wouldn't say all of them – some of them are willing to pay more (rents) because … profit-making is not their primary motive. They just want to have a presence here so that they become international, (it's) more for branding.' Orchard Road, Marina Bay Sands and VivoCity are malls targeted by bigger brands, he said. Mr Ang Yuit, president of the Association of Small and Medium Enterprises (ASME), said Chinese brands are here to invest. 'So they can pay higher (rent), because they are trying to get market share,' he said. CHINESE WAVE Major chains like Chagee and Haidilao declined CNA's request for comment for this article. But Nong Geng Ji, a brand with more than 100 outlets in China, said it "does not support nor engage in the practice of paying above-market rents to secure shop spaces during expansion'. The Hunan-style chain is managed and operated by Singapore-based Skyline Catering. 'We firmly believe that winning customers' loyalty must be grounded in the exceptional quality of our ingredients and the authenticity of our flavours, not through aggressive real estate tactics,' said a spokesperson. Tanyu, which serves Chongqing-style grilled fish, said the increased competition for limited prime retail spaces is likely to be pushing rent higher. The brand, which entered Singapore in 2017 and is also managed by Skyline, said there has been a 'more significant increase' in rent in the last two years, especially in 2024. A spokesperson added that the F&B scene here has become increasingly diverse, and acknowledged that mainland Chinese brands have expanded their presence. Besides Haidilao, which opened its first restaurant in Singapore in 2012, more recent entrants include the likes of ice cream chain Mixue, coffee chain Luckin and Sichuan brand Tai Er. This is not the first time Singapore is seeing a wave of foreign-origin eateries, said Mr Ernest Tan, a lecturer at Singapore Polytechnic's business school. 'About 20 years ago, we saw that there was a wave of Japanese restaurants coming in … and then later we (saw) Korean restaurants coming in as well,' he said. He predicted that at some point, the number of Chinese restaurants opening would plateau and maybe even decline. As of June 2024, there were 32 Chinese brands operating 184 shops in Singapore, according to research firm Momentum Works. The company's data also showed that the number of Mixue outlets in Singapore tripled from 10 in 2023 to 31 in May 2025. For Luckin, there were 30 stores in 2023, compared with 63 as of May this year. THE COST OF OCCUPANCY But is there a link between the increased presence of these Chinese brands and rising rents? The debate over rental costs at large in Singapore, while ongoing for some time, was pushed to the fore after Flor Patisserie, a bakery in Siglap, announced it would close at end-June or early July because its landlord had asked for a 57 per cent increase in rent. The Singapore Tenants United for Fairness (SGTUFF), a cooperative representing more than 700 business owners, then released a white paper calling for policies to address the issue of 'new and foreign players' with deep pockets and low-cost supply chains entering the Singapore market. SGTUFF also noted that these businesses were willing to pay premium rents. In response to CNA's queries, SGTUFF said it was not privy to rental negotiations and details of other tenants including and especially foreign businesses. 'When you see a lot of local tenants exit their shops complaining about high rentals or high rental renewals, and then you see a lot of these spaces being filled quickly by a new tenant, do you think that the new tenant is paying higher or lower rental than the previous tenant?" the group said. Real estate group CapitaLand's chief strategy officer Ervin Yeo subsequently posted on LinkedIn that occupancy cost – which can be a proxy for rent affordability – was sustainable. Occupancy cost is measured by taking rent as a percentage of total sales, and Mr Yeo suggested that a figure of less than 20 per cent was acceptable. He said the occupancy cost for CapitaLand Integrated Commercial Trust and Frasers Centrepoint Trust – also a real estate investment trust and mall owner – were at 17.1 per cent and 16 per cent respectively. 'This suggests that the revenues of our tenants are at a sustainable level relative to their rents,' he wrote. In response to CNA's queries, Frasers Property said it focuses on creating inclusive, community-centric retail environments. 'We refresh and curate our tenant mix to align with the demographics and needs of the local community, customers' preferences and feedback, as well as evolving retail trends and concepts,' a spokesperson said. 'We remain committed to maintaining a balanced and diverse retail ecosystem that fosters strong tenant partnerships and enhances the overall shopping experience.' The Urban Redevelopment Authority (URA) has reported that rentals of retail space decreased by 0.5 per cent in the first three months of the year, compared with a 0.6 per cent increase in the previous quarter. SGTUFF, however, said such data points tended to 'mask the real issues' for small local businesses, because they take into account big players that are doing well. 'It is industry knowledge that most, if not all, of these big tenants enjoy much lower rental rates and favourable rental terms compared to small players." It described occupancy cost as a 'very rough proxy measure' that must be taken with a 'big pinch of salt'. 'The true measure of healthy occupancy cost is rental (and) profits,' said the collective. SGTUFF added that URA's data aggregated 'all retail spaces in all developments across all floors for an entire region'. 'Just because URA data shows overall rental drop does not mean at all that rentals have dropped for small businesses in F&B and retail.' DEMAND, SUPPLY AND "EAT YOUR LUNCH" The broader picture shows that rents have risen more in recent times compared to the years before the COVID-19 pandemic, said Mr Alan Cheong, executive director for research and consultancy at Savills. 'The rise in rents over the past three years is probably due to the pandemic recovery process,' he said. Some 'prime frontage shops' have seen rents return to pre-pandemic levels, but that is not the case for overall rents for malls, Mr Cheong added. Mr Desmond Sim, CEO of real estate consultancy ETC, said both local and foreign tenants alike would be willing to pay higher rents for a good location, if crucial to the brand. 'It's still up to the market dynamics, it's still demand and supply, generally speaking,' he said. Mr Sim added that a Singapore brand trying to break into an overseas market would also be willing to pay top dollar to set up a flagship store. Locally, a Chinese brand looking to strengthen its presence in Singapore may put in a higher bid; while a local brand with enough recognition and exposure may put in a lower one. The local brand will hence be outbid by the Chinese brand that has a greater need. This makes it seem like prices are being jacked up, he said. Yet paying a higher rate is unlikely to be 'market practice' because tenants would not want to overpay for space, said Mr Sim. 'It would be more accurate to say that the arrival of mainland Chinese F&B restaurants has helped fill spaces that could otherwise be left vacant by local operators," said Ms Sulian Tan-Wijaya, executive director for retail and lifestyle at Savills Singapore. "Rather than to say that rents have increased because of the influx of mainland Chinese F&B businesses.' She acknowledged that rents have mostly increased in prime retail developments that are sought after by overseas brands. But F&B operators from China that Savills works with are discerning about locations and rents. 'They would not be prepared to pay more than what they would consider feasible,' she said. Beyond rental costs, some noted that Chinese F&B brands have also brought different strategies and approaches into the Singapore market. In China, the customer service journey starts even before you have ordered your food, said Mr Tan, the lecturer. 'From start to end, they will take care of you, you don't feel that your wait is too long … you can have unlimited snacks, you can have water." That model has been imported to Singapore, and people have taken notice, he added. Mr Hoon of Bosses Network also recognised that Chinese brands often offer "endless" appetisers, ice cream and other freebies. 'Singaporean businessmen need to counter (that),' he said. 'They might use the same system, or try to lower their costs, or give a bigger discount to keep their loyal customers.' Mr Yeo of CapitaLand wrote on LinkedIn that the Chinese retail scene was hyper-competitive. 'Everyone is a champion second-mover and will eat your lunch if you don't move fast enough,' he said. Chinese F&B operators see themselves as being in the supply-chain business instead, and care a lot about efficiency. He said managers there were graded on the interval between a customer being seated and the first plate of food arriving at the table. 'When the Chinese brands bring their operating juggernaut to our Singapore scene, there is some understandable nervousness by our local brands,' said Mr Yeo. 'But I believe that the Singapore spirit is to face competition with a 'bring it on' mentality, not a 'if you can't beat 'em, ban 'em' mentality. It's our home ground after all.' ASME's Mr Ang too said brands that make it out of China to set up shop in Singapore were 'highly evolved' and tended to be competitive and aggressive. '(We) can learn in terms of their ability to compete and how optimised they are,' he acknowledged. 'These are good points to learn from.'
BBC News
05-06-2025
- Business
- BBC News
Family shocked at rental costs in Guernsey
A man who left Guernsey said he was shocked to find the cost of rental accommodation had doubled when he returned 10 months Pinsard and his family moved to Australia in 2022 but after his wife was hurt in a car accident they decided to come back in June they had arranged a rental house for their first day back, Mr Pinsard said the property was in such poor condition they could not live in it - but they could not then find an affordable alternative.A report recently published by the Guernsey Community Foundation found young families were being "driven away" by rising living costs. Mr Pinsard said when the family had left Guernsey in 2022 they had been paying £1,300 per month for a two-bedroom house near the beach on the west said that in September 2023 they rented a "cramped" two-bedroom in St Sampsons that cost £2,600 per Pinsard added that he had found it "shocking that in such a short period of time, nine to 10 months, rental cost actually doubled".The government's Property Prices Bulletin showed the average local market rental price was £2,068 a month in the first quarter of figure is 1.5% higher than the previous quarter, 8.2% higher than the first quarter of 2024 and 51.7% higher than five years ago. 'Lots of sacrifices' Mr Pinsard said the family had been forced to live in temporary accommodation which had drained their savings."We got to the point where it was either we have to buy to get on to the property market or leave the island again," he Pinsards managed to buy a house, which needed renovation, thanks to "lots of sacrifices".Mr Pinsard said his wife worked extra shifts at the hospital and he had a side business he ran at the weekends to ensure they had a home."It is possible but only through many, many extra hours which takes time away from the children and family," he added.
CNA
04-06-2025
- Business
- CNA
Industry group calls for retail lease reforms amid soaring rents, including limits for foreign tenants
SINGAPORE: Optical retail chain managing director Bernard Yang has been hit by a double whammy in recent years – sluggish sales and rising operational costs, including rents. These pressures led Nanyang Optical to make some tough choices at its Marine Parade outlet, like cutting the hours of its part-time staff and downsizing its unit by almost half. 'In our years of running retail in Singapore … (rent has) been going up all the time. It's a question of how much,' Mr Yang told CNA. "If we were to keep the same unit, I think it's going to be very tough moving into the future, because I do see consumers' spending habits changing quite a lot. People are very comfortable buying online, going overseas,' he added. Because of this, the company is focusing on growing its e-commerce platform and could adopt a 'hybrid retail' model in the future. Soaring rental costs – a long-standing pain point for businesses – prompted the Singapore Tenants United for Fairness (SGTUFF), a cooperative representing more than 700 business owners, to release a new white paper in recent weeks. The group noted that rental costs can take up 30 to 50 per cent of revenue for food and beverage as well as retail businesses. 'Without legislative intervention in this area, many of the remaining small local players will not be able to survive,' it said in the white paper. 'Singapore as a whole will also be poorer off when what remains of our local shopping and dining vibrancy and sense of community gets further wiped out.' While retail rents across Singapore stayed stable in the first quarter of the year, falling 0.5 per cent according to the Urban Redevelopment Authority, an average of 450 retail stores shuttered monthly within that period. Last year, more than 3,000 food and beverage (F&B) establishments closed in the country – the highest in almost two decades since 2005. Owners told CNA then that rising operating costs, including rent, took a toll on their business. RENTAL CAP AMONG SUGGESTIONS SGTUFF is calling for retail lease reforms that include a cap on rental lease renewals, more prime spaces for local players, and penalties for landlords if they keep the shops empty for more than three months. It also recommended policies to address what it calls 'new and foreign players' with deep pockets and low-cost supply chains, who are willing to pay premium rents. Among its policy suggestions are an additional property tax for non-local retail tenants, reduced foreign worker quota, and higher levies for foreign workers. It has also called on the government to find ways to release more retail space not just to private landlords, but social enterprise cooperatives or private entities that are not purely for profit. SGTUFF chairperson Terence Yow said the group's idea of a cap on lease renewals came from other developed markets around the world such as Japan and Sweden, where rent renewals for commercial spaces are pegged to a formula or measure like the consumer price index. 'We think that such indexing of rent renewal increases is very fair … and is a fair reflection of market conditions, rather than very arbitrary or mercenary … price increases, which are too much of a shock for businesses today,' he told CNA on Monday (Jun 2). IN TALKS WITH AUTHORITIES Mr Yow also said that while retail leases currently must comply with a code of conduct for fair negotiations between tenants and landlords, this is not enough. 'We think (it's) ultimately about a very short supply of prime retail spaces versus still existing and new demand,' he noted. 'Whether they are new local players or big foreign players, (they are) continuing to express interest, and are willing to pay and bid for very high rentals and pay well-above pocket prices for local labour.' He said the surge in rental costs is an 'urgent issue' that the group has raised for some time now. But a 'confluence of forces' like labour shortages and lower consumer spending has intensified the situation, prompting renewed calls for action. It is in talks with Enterprise Singapore and hopes to reach some agreements in the coming months. 'We recognise that it is a symbiotic relationship. Tenants need landlords to do well and landlords need tenants to do well,' Mr Yow added. 'So we hope over the next few months, we can quickly come to some agreement on what are the right, urgent, short- and long-term measures, and start to implement some of them.' 'YOU WILL SEE THE BOTTOM FALLING OUT' Analysts said that the problem is unlikely to resolve soon, particularly as more international firms continue entering the Singapore market. 'If it's a safe haven with the geopolitical uncertainties, people will try to look to Singapore to invest, and they do not know the environment - and they are doing it not necessarily for capitalistic reasons alone, and because there's this safe haven element in it,' said Savills Singapore's executive director for research and consultancy Alan Cheong. '(Being in a) safe haven doesn't necessarily mean that you need to eke out a positive economic value-add to themselves and to the economy. 'Consequently, the ecosystem by the local established chains, F&B, retail industries also get affected by this weight of money coming in.' This would lead to foreign brands dominating prime locations in malls, Mr Cheong warned. He suggested that beyond slowing or freezing rent hikes, landlords can help stabilise the market by showing social responsibility rather than chase higher-paying tenants. CNA contacted all major landlords, most of whom declined to comment. Lendlease – the developer behind several malls like 313@somerset and Jem – said it takes a tailored approach to support tenants through different stages and formats, such as pop-up stores. Mr Yow warned that if things do not change on the rental front, 'copycat malls' will start popping up and people will not be incentivised to try their hand at running small businesses. 'I think you will see the bottom falling out. I think you will continue to see … an acceleration of local small players – many of whom have been in business for 5,10, 20, 30, years – continue to drop out from the market because it's just not sustainable,' he said. 'They cannot just keep increasing their prices. It doesn't work that way.'
