According to the Association of Small and Medium Enterprises (ASME), over 80 per cent of business owners said that besides wages and foreign worker levies, rental was the other major factor contributing to higher business costs in 2012.
Small and medium enterprises (SMEs), which operate with thin operating margins, have been especially hard hit. At Paragon Shopping Centre, for example, rent increased by 12.4 per cent for rental renewals and new leases between July and November 2013. SMEs in the industrial sector also face rising rentals, especially after July 2011 when JTC announced its divestments from high-rise ready-built factories. Industrial property prices doubled over the last three years, outpacing rent increases.
Rising rental trends in the past decade have coincided with the emergence of institutionalised ownership of commercial and industrial real estate, raising the issue of whether organised landlords have asymmetric bargaining power over their tenants. Singapore’s Real Estate Investment Trusts (REITs), the most visible of institutional real estate investors, have borne the brunt of rising unhappiness among the SMEs over their rising rental expenses.
Growth of the Singapore REITs sector was driven by rental appreciation and asset acquisitions. Total rental revenue increased at a rate of 5.8 per cent annually between 2008 and 2012, according to property broker CBRE Group. In 2012, Singapore’s REITs became the best performing in the world, chalking up average returns of 37 per cent, twice that in the United States, United Kingdom and Japan. Four of the top ten best performing REITs with assets of more than US$250 million in the region are from Singapore.
In their defence, REIT managers are quick to point out that they add value by taking advantage of property and portfolio efficiencies as well as better asset management.
To understand the perspectives of the different stakeholders, IPS has invited Mr Kurt Wee, President of ASME, and Mr Tham Kuo Wei, CEO of Mapletree Industrial Trust Management Ltd to each make a short presentation on the positions of SMEs and REITs on the issue. Their presentations will be followed by a short discussion by Associate Professor Sing Tien Foo from the Real Estate Department at the National University of Singapore.
The session will be moderated by Mr Manu Bhaskaran, Adjunct Senior Research Fellow at IPS and Partner and Member of the Board of Centennial Group Inc, a policy advisory group based in Washington, D C.
Please click here to view the programme.
The series of CDDs focusing on issues confronting the SME sector in Singapore includes: