Rising rents put the squeeze on small businesses in Singapore: Should the Govt do more?, Singapore News

AsiaOne

26-05-2025

SINGAPORE — The clock is ticking for Nicher, a bakery serving French pastries and coffee at The Brooks, a mixed-use development near Sembawang Road.
The bakery's owner, Melvin Koh, 39, has decided to sell the business when his lease expires at the end of June.
The former pastry chef with Marina Bay Sands says his lease will go up 15 per cent from his current rental of $5,000 if he chooses to renew it, which will make running the business unsustainable.
"Rent takes up at least 50 per cent of my total operating expenses," said Koh. "Costs of ingredients and labour are also rising."
Koh, who was charged a monthly rental of $4,500 when he started his business in 2022, is just one of a number of business owners across the island who are struggling with rising rents.
The rental squeeze has driven some businesses to write publicly about their woes on social media, drawing public attention to the issue.
One such business is Flor Patisserie, a cake shop in Siglap Drive. Chef-owner Heidi Tan said the landlord is raising the rent by 57 per cent, from $5,400 to $8,500, and that she intends to move out by early July.
In an Instagram post on May 7, she had said rent was "one thing that kills", calling on the Government to do more to support small businesses.
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On May 22, The Straits Times reported that at least five shophouse businesses in Siglap Drive have closed or are about to close because of rental hikes since 2024.
Grace Huang, co-founder of Neue Fit gym at Kallang Wave Mall, took to Instagram on April 30 to share her struggles with rent hikes.
The 42-year-old said the lease for her 372 sq m unit will expire in December and she fears that the rental will go up. Other sports tenants around her have faced rental increases of about 20 per cent.
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Since she started the gym in 2018, her rent has gone up by about 57 per cent, including through the Covid-19 pandemic. She pays more than $20,000 monthly now.
"Rent makes up about 30 per cent of our total monthly overheads, which is a huge burden for any small business," she said. "It's money we could be using to grow our programmes, support our team, or improve our members' experience."
She employs 10 full-timers, including national athletes who have themselves trained other current and past Team Singapore representatives. Grace Huang, co-founder of Neue Fit Gym, said rent has already gone up by about 57 per cent since she started the gym in 2018. PHOTO: Taryn Ng
"We are a sports business in a sports mall, in what's meant to be Singapore's sporting district — and yet, we're struggling to feel supported," she said, calling it disheartening.
Business owners say rising rents are choking out small businesses here which often do not have pockets as deep as chain stores and global brands, and are less able to cope with sudden hikes.
Experts ST spoke to also painted a picture of a retail environment where landlords hold most of the cards.
Huang said landlords should consider tenants' business performance, or how they contribute to the space, when deciding on their leases, and not apply the same rental models across the board.
The Government could also consider targeted rental relief or grants for certain businesses, such as those in health, sports and wellness in the sports districts, she said.
When contacted, a Kallang Wave Mall spokesperson said the current lease with Neue Fit began in 2017 and was subsequently renewed in 2022 based on "negotiated and mutually agreed rental terms and tenure".
"For a unit above 4,000 sq ft in size, the rental rate is well within market range," the spokesperson said, adding that formal discussions regarding future rental rates for the current unit have not started yet. Escalating rents
Sulian Tan-Wijaya, executive director for retail and lifestyle at Savills Singapore, said many malls are owned by real estate investment trusts (Reits) where there is little room to reduce rents or incentivise desirable brands with lower rents.
Prime city or suburban malls still enjoy high occupancies. For every space vacated by a weak operator, there will be more than one newcomer vying for that space, she said.
Shop units owned by private strata owners were probably acquired at high prices with mortgages to service. Owners facing higher interest rates will be less likely to lower their rents, she added.
She pointed out that one reason international brands can afford higher rents is that they benefit from strong supply chain networks, which bring down their costs.
According to Knight Frank Research, as at the first quarter of 2025, prime retail rents in a basket of malls within the prime central region have increased by 11.8 per cent in the post-pandemic period, while prime suburban retail rents rose by 5.8 per cent.
These gains follow a sharp drop in the pandemic years of 2020 and 2021, when prime retail rents fell by more than 20.2 per cent in the central region and by 8.7 per cent in the suburban region.
The retail sector is expected to remain challenging in 2025, with rents likely to ease and stabilise within a modest growth range of one per cent to three per cent over the course of the year, said Knight Frank head of retail Ethan Hsu.
While there have been calls for the Government to intervene to stabilise rents, Hsu cautioned that intervening in market forces could lead to unintended consequences such as reduced investment in commercial property, or a decline in the quality of retail spaces due to decreased spending on maintenance.
At the moment, the Code of Conduct for Leasing of Retail Premises - which landlords must voluntarily adopt - sets out leasing principles when drawing up contracts and a framework for resolving lease disputes. Space for government support?
But Hsu acknowledged that there could be scope for the Government to do more.
"For instance, the Government could consider managing the supply of F&B spaces within specific geographic areas to prevent market saturation and cannibalisation within a designated zone," he said, adding that this will help food and beverage businesses survive better amid limited demand in the small local market.
Another measure that could be considered is a tax similar to the additional buyer's stamp duty on chain F&B brands that expand too rapidly within a short period, he said. This could help moderate F&B growth to a more sustainable pace.
The Singapore Tenants United For Fairness (SGTUFF), a group of more than 600 front-line business owners across the food and beverage, retail and services sectors, said targeted regulatory mechanisms could protect the viability of small businesses while balancing the interests of investors.
Unregulated rent increases contribute to inflationary pressures, pushing up business costs and consumer prices, said SGTUFF in a social media post on May 2.
The group argued for some form of rental regulation, including a tiered rent cap system based on attributes such as property size and location, and incentives for landlords who offer long-term and stable leases.
Brand strategist Debbie Yong proposed piloting rent stabilisation in selected districts earmarked for cultural and entrepreneurial preservation.
Another way is to strengthen the Code of Conduct for Leasing of Retail Premises by turning it into enforceable legislation, she said, adding that it would be a practical first step towards rebalancing the power dynamics between landlords and tenants, without compromising long-term growth.
Yong added that the rise in commercial rents is having a chilling effect on creativity and innovation in the F&B and retail sectors.
"As consumers, we ultimately suffer from lack of diversity and vibrancy in our dining and retail landscape," she said.
"That, in turn, further dampens domestic demand, creating a downward spiral that undermines the very ecosystem we're trying to grow."
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This article was first published in The Straits Times. Permission required for reproduction.