It was reported earlier this week that Jun Low, the Director of JC Global Concepts, posted a message on her Facebook page, highlighting that the Government should step in to prevent retail landlords from bullying tenants, specially with regard to raising rentals during every renewal period for the tenants.
Ms Low is a prominent food and beverage (F&B) entrepreneur who is behind some of the renowned restaurants in Singapore and overseas. She was responding to an article published by The Business Times titled “Singapore business body pushing for fair rent terms from private landlords”.
The BT reported that F&B players are now faced with tougher business environment, thanks to “the lopsided leases in Singapore”, which favours the landlords more than the tenants. Some of the problems mentioned include short-term leases which again benefits landlords as well as personal guarantee clause that “makes the tenant personally liable to pay the rent for the remaining term if he or she ceases operations”.
In addition, the pre-termination clause also puts pressure on tenants as landlords are given the green light to terminate a lease after giving, for example, just three months’ notice, as it is a condition in REIT (Real Estate Investment Trust) tenancies.
Ms Low warned that if the unfair rent hike continues, it will eventually stifle the economy. In particular, she singled out GLC CapitaLand. She said, “CapitaLand – being the leader and government backed company – please take the lead to exercise more conscience and be conscientious in your rent rates pricing. Stop taking such high unnecessary quantum of security deposits to hoard your pile of cash further weighing down on your tenants’.”
“Not only do landlords want to have the whole pie and eat it all, they grab the crumbs altogether and ask for another pie,” she added. As such, Ms Low pointed out that the government directives should not support this kind of greed, urging them to step in and withdraw all REITs.
In response to queries from TOC, Ms Low said that she thinks this situation happened due to the “domino effect” made by the Government. If this continues where landlords increase the rent at every renewal period without considering tenants’ situation, it will not motivate entrepreneurs and enterprises, she added.
Due to the high cost of business operations in Singapore, she said that many multinational corporation (MNCs) have chosen to leave Singapore, and if this goes on, then the remaining SMEs will eventually cease its operation “if you (landlord) continue to stifle them”.
She noted that landlords would still be making a pretty “handsome profit” even without the rent hikes. As such, she questioned the need to make life difficult for the tenants by increasing rentals.
When asked about REITs, Ms Low said that it is so short-sighted. This is because if there are more for the businesses to offer, then the excess money will rotate back into the industry and everyone will have a better spending power. But with the current model, all the money is just going back to the big corporations and nothing for the people.
“The Government really needs to re-think about this. When everybody does not have enough spending power or disposable income, then how can it be recycled back into the economy?” she asked.
WP NCMP Yee Jenn Jong brought up Singapore’s high rental situation in Parliament before
Five years ago in Mar 2014, WP NCMP Yee Jenn Jong debated with then Minister of State for Trade and Industry Teo Ser Luck in Parliament with regard to the high rental situation in Singapore affecting SMEs.
“We have already lost the ability to manage rental costs, having ceded buildings that the Government once controlled to REITS, which now dominate the market. In commercial retail, REITS, with their huge collective hold on the market can force up prices, sometimes steeply with each renewal,” Mr Yee argued.
“I call on the Government to look at intervention measures, including having more industrial space of its own to set desired rental benchmarks and to provide checks on the rental practices of REITs in the malls, as some Members have mentioned earlier.”
But Teo Ser Luck defended REITs, saying, “Some REITs buy conveniently located properties, such as those near MRT stations. And they also usually invest in asset enhancements and national marketing efforts which have helped to increase foot traffic to their malls, and raised the revenues of some of the retailers. So these mall owners usually charge higher rents.”
“Nevertheless, let me assure Members that we will continue to monitor this rental market. We know it has come up as an issue. Many Members have raised it. We will monitor it and we will intervene if we see evidence of collusion or abuse of market dominance by any player, including REITs,” he added.
MTI: REITs have no impact on retail rents
Following the Parliamentary debate in March 2014, MTI published a report in May 2014 saying that REITs have no impact on retail rents.
After removing factors such as location and asset enhancement initiatives at malls, “we find that the rents in REIT-owned malls are not statistically different from rents in single-owner malls”, MTI said.
“Furthermore, among the malls that are acquired by REITs, we find no evidence to indicate that the rents in these malls increased as a result of the acquisition,” it added. “Nonetheless, (rental increase) appears to be largely driven by the better physical characteristics of the REIT-owned malls… like asset enhancements and distance to the nearest MRT station.”
Not satisfied, Mr Yee of WP continued to push the matter in Parliament in Jul 2014. He asked if the government agreed with the MTI’s report. Teo Ser Luck replied on behalf of the government, “REITs have some signalling effect on landlords around the area when the rental increases or decreases… But REITs may not be the dominant factor in influencing the market.”
Publicly, there was already a growing perception that rents at malls owned by REITs are rising at a faster pace and threatening the survival of many local SMEs back in 2014.
But Mr Teo would only say that the government would be looking at publishing additional information on retail rents to “add to the existing information available on the rental market and help businesses make more informed decisions during lease negotiations”.
Five years have passed and even Mr Teo has quietly stepped down from the government. But the Singapore’s high commercial rentals continue to persist and plague SMEs, resulting in Ms Low’s posting on social media to alert the public and asking for governmental help.
Would Ms Low’s plea be falling on death ears like Mr Yee’s 5 years ago?