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30-04-2014, 08:10 AM
SMEs want rules to ensure fair rents
Many attendees at forum looking to help in protecting growing firms
Published on Apr 30, 2014 1:21 AM
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A Ya Kun Kaya Toast outlet in Singapore. Ya Kun International chief executive Marc Leoi said local SMEs need to be realistic and noted that rents for its branches in Hong Kong and China are sometimes higher than in Singapore. -- PHOTO: YA KUN
By Tee Zhuo
BOSSES of small and medium-sized enterprises (SMEs) want better rules in place to ensure fairer rents and occupancy terms to help them battle soaring leasing costs.
A Singapore Business Federation (SBF) forum held last week found that 72 per cent of 180 attending business owners and leaders said they would either like to see legislation or a "fair consideration" lease framework enacted to reduce rent pressures and protect growing firms.
The call comes in a period of rising rents: A parliamentary response this month noted that one in 10 retail tenants has had increases of more than 50 per cent from January 2012 to May last year, although these tended to be for those renewing their leases or who had units in more attractive locations.
The forum ranked "land, space and rental" as the second most pressing concern after manpower.
Former MP Cynthia Phua, who is a member of SBF's SME committee, said firms in retail and the food and beverage industry are the hardest hit.
"(They) have a much higher occupation cost structure, are more sensitive to rental increases due to the higher impact on business cost," she added.
The SBF is exploring developing a standardised set of rental lease terms and will eventually pursue legislation.
It said the committee will work first with the Government to "promote transparency in rental costs and practices", for example, through publishing rental data.
SBF chief operating officer Victor Tay said the purpose of the framework was not to side with smaller firms against landlords.
"We want a balanced framework that does not short-change either side. We do have some of the big players in SBF as well," he added. The SBF counts real estate giants CapitaLand, Far East Organization and Keppel Land as members.
Firms at the forum shared "horror stories" of lease agreements biased towards the landlord.
One participant said his landlord included a clause asking for a 30 per cent cut of his gross turnover in addition to the base rental.
Another noted clauses that gave landlords the right to alter the boundaries of leased premises.
Mr Tay said Singapore has allowed market forces to determine rental rates up to now, "but land scarcity and only a few dominant market players means the playing field is not that level".
He noted that other developed economies, including Britain, Australia and South Korea, already have measures to protect tenants and small retailers. Britain has had a code for leasing business premises since 2007 in addition to a Landlord and Tenant Act enacted in 1954. The code, which includes checklists and model lease templates, was drafted as a joint voluntary agreement between the government, tenants and landlords.
Singapore does not have any specialised rules for this area other than general laws, such as those governing contracts.
But Mr Marc Leoi, chief executive of home-grown food and beverage chain Ya Kun International, thinks local SMEs need to be realistic.
"Afford what you can... many businesses get into situations where they actually cannot afford the rents," he said.
Rents for Ya Kun's branches in Hong Kong and China are sometimes even higher than in Singapore, he added.
"We don't sign every lease that comes to us."
teezhuo@sph.com.sg
Many attendees at forum looking to help in protecting growing firms
Published on Apr 30, 2014 1:21 AM
PRINT EMAIL
A Ya Kun Kaya Toast outlet in Singapore. Ya Kun International chief executive Marc Leoi said local SMEs need to be realistic and noted that rents for its branches in Hong Kong and China are sometimes higher than in Singapore. -- PHOTO: YA KUN
By Tee Zhuo
BOSSES of small and medium-sized enterprises (SMEs) want better rules in place to ensure fairer rents and occupancy terms to help them battle soaring leasing costs.
A Singapore Business Federation (SBF) forum held last week found that 72 per cent of 180 attending business owners and leaders said they would either like to see legislation or a "fair consideration" lease framework enacted to reduce rent pressures and protect growing firms.
The call comes in a period of rising rents: A parliamentary response this month noted that one in 10 retail tenants has had increases of more than 50 per cent from January 2012 to May last year, although these tended to be for those renewing their leases or who had units in more attractive locations.
The forum ranked "land, space and rental" as the second most pressing concern after manpower.
Former MP Cynthia Phua, who is a member of SBF's SME committee, said firms in retail and the food and beverage industry are the hardest hit.
"(They) have a much higher occupation cost structure, are more sensitive to rental increases due to the higher impact on business cost," she added.
The SBF is exploring developing a standardised set of rental lease terms and will eventually pursue legislation.
It said the committee will work first with the Government to "promote transparency in rental costs and practices", for example, through publishing rental data.
SBF chief operating officer Victor Tay said the purpose of the framework was not to side with smaller firms against landlords.
"We want a balanced framework that does not short-change either side. We do have some of the big players in SBF as well," he added. The SBF counts real estate giants CapitaLand, Far East Organization and Keppel Land as members.
Firms at the forum shared "horror stories" of lease agreements biased towards the landlord.
One participant said his landlord included a clause asking for a 30 per cent cut of his gross turnover in addition to the base rental.
Another noted clauses that gave landlords the right to alter the boundaries of leased premises.
Mr Tay said Singapore has allowed market forces to determine rental rates up to now, "but land scarcity and only a few dominant market players means the playing field is not that level".
He noted that other developed economies, including Britain, Australia and South Korea, already have measures to protect tenants and small retailers. Britain has had a code for leasing business premises since 2007 in addition to a Landlord and Tenant Act enacted in 1954. The code, which includes checklists and model lease templates, was drafted as a joint voluntary agreement between the government, tenants and landlords.
Singapore does not have any specialised rules for this area other than general laws, such as those governing contracts.
But Mr Marc Leoi, chief executive of home-grown food and beverage chain Ya Kun International, thinks local SMEs need to be realistic.
"Afford what you can... many businesses get into situations where they actually cannot afford the rents," he said.
Rents for Ya Kun's branches in Hong Kong and China are sometimes even higher than in Singapore, he added.
"We don't sign every lease that comes to us."
teezhuo@sph.com.sg
