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Fair tenancy framework and more rental transparency can help advance SMEs development

24 April 2014 [Singapore] – This was the result of a poll at a business forum organised by the Singapore Business Federation (SBF) on Tuesday, 22 April. Close to 180 business leaders from a myriad of industries attended the forum to engage on business sentiments and challenges pertaining to manpower constraints, rising rental and manpower costs, and internationalisation.

In the midst of Singapore's business restructuring, Singapore companies are increasingly challenged by escalating business costs and the manpower crunch. The poll, conducted at the forum, reflected that companies are progressive. Some 53% of participants are looking at growing their reach of international markets. To overcome the pain of restructuring, some 52% are looking at business model innovation and developing new businesses. In the aspect of business constraints, the top three concerns of companies are manpower, land and rental, and financing.

Of the participants who attended, some 73% of companies are affected by rental rates and lease terms negotiation. When asked about measures to best promote the development of SMEs and reduce pressure of rental issues, some 37% opted for Fair Tenancy Legislation; while 35% would like to see a Fair Consideration Lease Framework.

At the forum, companies gave feedback that the lease terms for premises are onerous and unfair, and mainly protect the interest of the landlord. Some examples include, rental based on a percentage of gross turnover, landlords have the right to pre-terminate, move, and alter the boundaries of the tenants' premises and landlords insisting that tenants use their point-of-sale (POS) system but tenants have to bear the expenses.

"Economies such as Korea, Belgium and Australia have legislated tenancy acts to protect tenants and small retailers; while UK has both legislation and a voluntary code which consists of checklist and model lease templates to help tenants in lease negotiation and renewal. Singapore may wish to explore similar legislation or fair consideration lease framework." said SBF's Chief Operating Officer, Mr Victor Tay.

Echoing similar sentiments, Ms Cynthia Phua, member of the SBF-led SME Committee (SMEC), said, "Tenants, especially those in retail and F&B who have much higher occupation cost structure, are more sensitive to rental increase due to the higher impact on business cost. There are many small entrepreneurs and retailers and I strongly believe that they should come together to negotiate for a fair consideration framework. We like to urge small retailers to come forward to contribute views."

Moving forward, the SMEC will explore the following 3-pronged approach to address lease and rental issues:

  1. Work with the Government to promote transparency in rental costs and practices - publication of rental data to reduce information asymmetry
  2. Improve SMEs' understanding of tenancy terms - develop a "How to" guide on tenancy terms
  3. Work with stakeholders to explore the development and adoption of standardised rental lease terms - Government landlords could be early adopters

Other findings from the polling exercise revealed that companies are keen to see more financing channels made available to SMEs - 29% polling to the notion of an SME bank, 26% for the provision of SME specific banking loans, and 18% agreeing that access to new financing options can be a viable option. On the subject of internationalisation, 31% of participants would like to collaborate with larger enterprises in overseas projects while 25% indicated that Merger & Acquisition support should be broadened for international acquisitions.

A panel of distinguished opinion leaders provided useful business insights and shared success stories on overcoming constraints and charting business growth. Panelists included Kurt Wee, President of ASME, Marc Leoi, CEO of Ya Kun International Pte Ltd, Tay Kok Khiang, Chairman of A*STAR Aerospace Programme, Cynthia Phua, Executive Vice President of Singbridge Corporate Pte Ltd, and SBF's Chief Operating Officer, Victor Tay.

Kurt Wee (President of ASME), Tay Kok Khiang (Chairman of A*STAR Aerospace Programme), Victor Tay (COO of SBF), Marc Leoi (CEO of Ya Kun International Pte Ltd) and Cynthia Phua (Executive Vice President of Singbridge Corporate Pte Ltd)

One of the breakout sessions at the Capacity Building Forum

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