Rental Increases Hard To Swallow, Say Eateries

Source : The Sunday Times, Feb 3, 2008

SIX hundred and ninety.

That is the extra number of Vietnamese sandwiches that Baguette, a sandwich store in Raffles City, has to sell a month to adjust to an increase in rent.

Indeed, food and beverage (F&B) outlets have not been spared by recent retail rental hikes of as much as 40 per cent per sq ft (psf) in Raffles Place.

Some businesses have had to relocate as a result.

Mr Wei Chan, business development manager of Baguette, says the store, whose lease is up in May, is facing a 65 per cent spike in rent. His outlet offers no seating so there is a limit to the number of customers he can attract and makes ’selling 690 more sandwiches a month a near-impossible task’.

He is considering shifting to a larger outlet with seating in Capital Square where the rent psf is lower.

Rising rents also affected Eurasian restaurant Quentin’s, previously in East Coast Road.

Chef-owner Quentin Pereira shifted to a much larger unit in the Eurasian Association in Ceylon Road in December last year because the rent is almost 40 per cent less.

Explaining the rent increase, Mr Donald Han, managing director of property consultant Cushman & Wakefield, says: ‘In the last two years, the Singapore economy grew at its fastest pace, above 7 per cent per annum since it was in the doldrums in 2003. The boom resulted in new retail tenants and F&B concepts jostling for limited retail space.’

According to Mr Charles Chua, PropNex Realty’s head of commercial department, rents for a Raffles Place ground-level shop have increased by some 40 per cent, from $18 to $35 psf, and basement shops by some 35 per cent, from $12 to 25 psf.

He says the rental hike in areas outside Orchard Road is more manageable, about 3 to 5 per cent year-on-year on average.

Local sandwich chain Cedele, which has three outlets in Raffles Place, had to bear the brunt of rental hikes of between 18 and 50 per cent when the leases of some of its 13 outlets were up for renewal last year.

The chain chose to remain in these locations to retain customers. But its executive director Yeap Cheng Guat says: ‘This rent increment is becoming more difficult to absorb as we cannot pass this to our customers.

‘If rental continues to escalate at this non-sustainable and unrealistic rate, we will have no alternative but to consider relocating.’

Mr Han says rents are expected to climb 5 to 8 per cent this year though successful and established malls are likely to ask 10 to 15 per cent more.

He adds that the rental market might ‘adjust itself to offer more value to F&B tenants’ in the next two years, given the addition of some 3 million sq ft of retail space with the opening of three malls in Orchard Road, as well as the Marina Bay Sands shopping mall.

Consumers LifeStyle interviewed say they will still patronise their favourite eateries even if they relocate.

Civil servant Julia d’Silva, 55, a fan of Quentin’s, says: ‘No matter where it moves, I will follow because it’s the only restaurant here serving good Eurasian food.’