The Urban Redevelopment Authority (URA) has reported that rentals of retail space decreased by 0.5 per cent in the first three months of the year, compared with a 0.6 per cent increase in the previous quarter.
SGTUFF, however, said such data points tended to “mask the real issues” for small local businesses, because they take into account big players that are doing well.
“It is industry knowledge that most, if not all, of these big tenants enjoy much lower rental rates and favourable rental terms compared to small players.”
It described occupancy cost as a “very rough proxy measure” that must be taken with a “big pinch of salt”.
“The true measure of healthy occupancy cost is rental (and) profits,” said the collective.
SGTUFF added that URA’s data aggregated “all retail spaces in all developments across all floors for an entire region”.
“Just because URA data shows overall rental drop does not mean at all that rentals have dropped for small businesses in F&B and retail.”
DEMAND, SUPPLY AND “EAT YOUR LUNCH”
The broader picture shows that rents have risen more in recent times compared to the years before the COVID-19 pandemic, said Mr Alan Cheong, executive director for research and consultancy at Savills.
“The rise in rents over the past three years is probably due to the pandemic recovery process,” he said.
Some “prime frontage shops” have seen rents return to pre-pandemic levels, but that is not the case for overall rents for malls, Mr Cheong added.
Mr Desmond Sim, CEO of real estate consultancy ETC, said both local and foreign tenants alike would be willing to pay higher rents for a good location, if crucial to the brand.
“It’s still up to the market dynamics, it’s still demand and supply, generally speaking,” he said.
Mr Sim added that a Singapore brand trying to break into an overseas market would also be willing to pay top dollar to set up a flagship store.
Locally, a Chinese brand looking to strengthen its presence in Singapore may put in a higher bid; while a local brand with enough recognition and exposure may put in a lower one. The local brand will hence be outbid by the Chinese brand that has a greater need.
This makes it seem like prices are being jacked up, he said.
Yet paying a higher rate is unlikely to be “market practice” because tenants would not want to overpay for space, said Mr Sim.
“It would be more accurate to say that the arrival of mainland Chinese F&B restaurants has helped fill spaces that could otherwise be left vacant by local operators,” said Ms Sulian Tan-Wijaya, executive director for retail and lifestyle at Savills Singapore.
“Rather than to say that rents have increased because of the influx of mainland Chinese F&B businesses.”
She acknowledged that rents have mostly increased in prime retail developments that are sought after by overseas brands.
But F&B operators from China that Savills works with are discerning about locations and rents.
“They would not be prepared to pay more than what they would consider feasible,” she said.
