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?
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.
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.
The hustle and bustle has returned to Toa Payoh Central as retail shops are allowed to open. (Photo: Jeremy Long)
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.
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.
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.
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.
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.
Lee Kwan Ok is a Professor and Deputy Head at the Department of Real Estate, National University of Singapore Business School. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.
Continue reading...
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.
Related:
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.
The hustle and bustle has returned to Toa Payoh Central as retail shops are allowed to open. (Photo: Jeremy Long)
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.
Related:
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.
Related:
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.
Lee Kwan Ok is a Professor and Deputy Head at the Department of Real Estate, National University of Singapore Business School. The opinions expressed are those of the writer and do not represent the views and opinions of NUS.
Continue reading...