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Mar 05 2017

Rent 'Makes up Small Part of Costs'

RENTALS.SG Comments: An interesting article that appears to fly in the face of recent complaints on the high cost of rent in Singapore. You will recall that Singapore recently featured in the Top 5 global cities for the most expensive residential rentals (article on this website). RENTALS.SG helps landlords reduce the cost of renting their commercial and residential properties by going direct to tenants.

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Attributed to Business Times, March 04 2017. Chia Yan Min, Economics Correspondent.

High rents are a common complaint among Singapore companies, but Minister for Trade and Industry (Trade) Lim Hng Kiang sought to show in Parliament yesterday that rental costs here are not punitive.

Rent makes up a small share of total business costs for firms in the manufacturing and service sectors, while retail rentals have fallen over the years, he said.

The Government is keeping a close eye on business costs to ensure that they do not rise excessively, he added.

Mr Lim was responding to concerns raised by MPs on both sides of the House - including Mr Henry Kwek (Nee Soon GRC), Ms Cheng Li Hui (Tampines GRC), Mr Chen Show Mao (Aljunied GRC) and Non-Constituency MP Dennis Tan - about firms being squeezed by high rents even as they grapple with slowing economic growth.

Rents generally make up a small share of total business costs for small and medium-sized enterprises (SMEs) in the manufacturing sector, at between 0.7 per cent and 4.8 per cent in 2015, Mr Lim said.

They also constitute less than 5 per cent of business costs for most service sectors.

Rents for SMEs in retail, as a share of total business costs, have dropped from 32 per cent in 2011 to 30 per cent in 2015, on the back of the fall in retail rentals.

"We expect rental costs to moderate further with more space coming on-stream," Mr Lim added.

Industrial landlord JTC Corporation has also been developing industrial facilities with shared services, to help SMEs reduce capital expenditure and operating costs.

To provide space for start-ups, JTC set up LaunchPad@one-north in 2015 and plans to build a network of LaunchPads around Singapore, with the next one to be located in the Jurong Innovation District.

"Ultimately, helping firms to restructure, such as by going digital or innovating, is the sustainable way to manage business costs," said Mr Lim. The minister also said the Government is monitoring Singapore's slowing economy and "stands ready to take decisive action if needed".

For instance, measures have been introduced to facilitate access to working capital and finance in the hard-hit marine and offshore engineering sector, as it copes with the prolonged weakness in oil prices.

Responding to Dr Tan Wu Meng (Jurong GRC), who asked if the support measures have been successful, Mr Lim said they are expected to catalyse about $1.6 billion in loans to the sector over one year.

Applications amounting to more than $90 million of loans have been approved as of last month, he added.

Chia Yan Min

A version of this article appeared in the print edition of The Straits Times on March 04, 2017, with the headline 'Rent 'makes up small part of costs''