Association calls for landlords to cut rents by 20-30 per cent, with 20,000 jobs on the line
WITH sales plunging by 20 to 30 per cent and profit margins “almost negligible if not negative”, 20,000 jobs - that’s a fifth of retail employees - are at stake as stores face the real prospect of folding.
This is red alert sounded by the Singapore Retailers Association (SRA) after an emergency meeting on Wednesday of council members and leading retail figures. In a strong statement yesterday, it called on landlords to give rental rebates of “at least 20 to 30 per cent” immediately - the “bare minimum” to ensure survival.
Even as occupancy costs have risen 50 to 80 per cent over the last three years, landlords “have proven slow to acknowledge or respond to the current downturn”, the SRA said. This, even after the Government announced a hefty property tax rebate for landlords on Jan 22.
Except for Government landlords, SRA’s executive director Ms Lau Chuen Wei told Today, the rest “are currently not willing to budge, and some even have the audacity to increase their rental rates.”
She declined to name names, only adding that SRA has written to “all landlords and are seeking audience with them one by one”.
While some mall landlords, like CapitaLand, Mapletree and Lend Lease, have announced they would pass on the full 40-per-cent property tax rebate to tenants - it would amount to 40 cents out of every $10 in rent - Ms Lau said some retailers feel this is “too little too late”.
“What the retailers need urgently is a reduction off the base rent, as this is what’s cutting very sharply into their bottom line,” she said.
One tenant at Square 2 in Novena told Today that when he renewed his lease last month, he got a 5-per-cent rental cut, though he had asked for a 10-to-20 per cent reduction. There was no mention of rebates or other form of help.
“At Square 2, more shops are closing down than tenants are moving in. On the ground floor alone, there are five or six units vacant at the moment,” he said.
Mr Lee Han Fong, director of cafe chain Secret Recipe which has 14 outlets here, said when the lease for a town outlet was renewed in end-2008, the rent was raised 15 per cent.
But “some landlords have recognised the (bad economic) situation and have been active in stepping up to help tenants, mostly through marketing,” Mr Lee said.
“In our nine years of business, this is the only time … we’re really worried because sales have been affected. We‚re more worried about the middle and end of the year, when consumers feel more effects of the downturn”.
The chain will ask for lower rentals when other outlet leases come up for renegotiation this year.
SUBHD: What landlords are doing: Just lip service?
A report yesterday by property consultancy CBRE showed, in the fourth quarter, prime Orchard Road retail rents slipped 1.9 per cent on-quarter, the first drop since 2003, even as retail sales volume declined by 5.9 per cent in the same period according to latest government figures.
When contacted, Maple Tree - which owns Vivo City and HarbourFront Centre Retail - said it is doing its best to help tenants survive the slowdown.
Other than passing on the full benefits of the property tax rebate, “we are also looking into individual cases where our tenants are facing short-term cash flow problems,” said Ms Shae Hung Yee, vice-president of corporate communications.
Specific assistance measures include restructuring the leases. “We feel this focused approach would better channel our limited financial resources to cases where help is most needed, rather than an across-the-board rental rebate.”
A spokesperson from Frasers Centrepoint Limited - which runs The Centrepoint, Causeway Point and Northpoint among others - said it will also pass on the tax rebate benefits and is now “working out the details”.
CapitaLand, the first to announce it would pass on the rebate, adds that it will continue to “stay close to our retailers, work with them individually to better understand the specific issues that they are facing so that we can customise a solution jointly with them”. It manages Tampines Mall, Junction 8 and Hougang Plaza, among others.
The other mall landlords contacted, Far East Organization and City Development Limited, did not respond to TODAY‚s queries as of press time.
SRA‚s Ms Lau, however, is sceptical. “So far, it‚s only lip-service and PR gestures on the part of the landlords. They don‚t seem to understand the plight of the retail tenants,” she told TODAY.
Sales are there yes, but slowing, and “anecdotal evidence” suggests many retailers‚ topline figures are shrinking. Should stores fold, this would have a knock-on impact on industries that feed off the health of the retail sector, such as media, F&B and advertising, she noted.
“This is the reason the SRA is indicating that retailers really need a reprieve of base rent reductions by at least 20 to 50 per cent, at least for a temporary period, until things look up.”
