The Big Read: Are rents really killing businesses?

Fair Tenancy Industry CommitteeWith commercial rents projected to grow this year, the question is how will this impact businesses already grappling with rising costs and whether they have to pass on these costs to consumers in an already inflationary environment.

Dr Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru Group, said that office rents are rising because most employees are shifting away from remote working arrangements and returning to working in offices, and there is limited supply in the short run. The company said Orchard prime retail rents are expected to have grown by 4.2 per cent year-on-year in 2022, followed by a 2.5 per cent year-on-year growth in 2023, as Singapore’s tourism continues to recover.

For instance, rental can be based on floor area, the amount of sales, or a combination of both — but there cannot be a clause that allows tenants to be charged whichever amount is higher. There are also market nuances to consider, added Mr Wong. For instance, the top malls are able to attract the bulk of footfalls and raise rents, while the weaker malls have to grapple with higher vacancy rates.Supported by a return to office by workers, other city area rents are also expected to increase by 1.5 per cent year-on-year in 2023.

Capitaland Integrated Commercial Trust — 10 retail properties including IMM Building and Bugis JunctionFrasers Centrepoint Trust — Nine retail properties including Northpoint City and Waterway PointThe Reit Association of Singapore said that as of Dec 31 last year, there are 42 Singapore Reits and property trusts listed on the Singapore Exchange, making up for a total market capitalisation of S$100 billion or around 12 per cent of the entire Singapore Stock Exchange.

Historically, the bank said that Reits have also performed well in a rising interest rate environment.Numerous articles in the past have blamed Singapore’s Real Estate Investment Trusts for prioritising investors returns, which causes unjustifiable rent increases. But while tenants have the option of moving out to another location if they feel that rent is too high, Mr Colin Tan, a former research director of a global real estate consultancy firm, said that there is only a limited pool of landlords that they can choose to rent from.

Though retail rent is flat for now, Mr Tan the property analyst worries that it may rise to a level where it could be unaffordable for all except major brands and chains, and ultimately affect the diversity of offerings available for consumers, which will in turn impact Singapore’s reputation as a shopping haven for tourists.

“You just need to see those malls run by Reits. You seldom see a shop that is empty for too long,” Mr Mak said.In any case, Mr Mak said that rent often constitutes between a fifth and a quarter of a tenant’s business cost, and that there are other challenges that a business will need to overcome to stay in operation.

Thanks to PAP. They increased GST to add more pain to Singaporeans.

Speaking to commercial tenants, TODAY found that the effects of the pandemic and inflation have left them struggling to survive as rental prices rise and consumers stay in.

Well they kill consumers first and without consumers, than it kills business hahhah

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