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.
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).
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.”
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.
A shopping mall in Singapore.
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.”
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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).
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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.
A shopping mall in Singapore.
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.”
Continue reading...