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SINGAPORE – The Singapore Competition and Consumers Commission (CCCS) is investigating the private retail leasing market amid a chorus of shopping center tenant complaints about an imbalance of bargaining power with landlords and unfair terms in contract contracts. lease.
Tenants had previously said that this imbalance, among other things, has seen them shoulder a large share of the financial burden amid the slowdown caused by the Covid-19 pandemic.
The CCCS has released a survey soliciting feedback from tenants on market competitiveness and lease terms as part of its market study.
The survey was sent to members of trade associations, including the Singapore Retail Association (SRA) and the Singapore Restaurant Association (RAS), during the past week.
The goal is to help CCCS better understand the market structure and identify any anti-competitive practices, according to a circular to various trade associations seen by The Straits Times.
The feedback from the companies will also give government agencies a more comprehensive view of the private retail leasing market and will identify any issues that need to be addressed, the circular said, adding that the survey responses will be kept confidential.
The competition watchdog said in response to ST’s questions that there have been recent reports suggesting that tenants in private shopping centers may have been subject to unequal bargaining power in their lease agreements.
“As such, the study aims to better understand the market for private business premises leasing in Singapore, including how market characteristics impact competition in Singapore,” said a spokesperson.
Previous market studies by the CCCS, including on the online travel reservation and formula milk sector, have concluded with recommendations to improve the functioning of the market, such as legislative changes.
Questions about your current tenant survey include how feasible are stratum or public developments as alternatives to private commercial spaces; if rental rates charged by different owners are available for comparison; and if there have been any issues regarding unfavorable lease terms, such as short notice periods for lease termination.
The study comes amid complaints that some mall owners have been setting foot on rental aid for tenants during the two-month breaker, when most stores have been forced to close.
The Covid-19 outbreak has also fueled fair tenure legislation, as retailers say the current fight has brought the growing power imbalance to the fore.
SG Tenants United For Fairness (SGTUFF), an informal grouping of more than 700 privately owned tenants trained in February, told ST that it has been working with SRA and RAS on recommendations for fair lease legislation and that it will soon have more to share. about the topic .
The CCCS survey is a positive government effort that follows the industry’s longstanding commitment in terms of unfair leasing that has become the norm, a group spokesperson said.
Such clauses commonly found in lease agreements include restrictions on the opening of another point of sale within 1 km of a shopping center, allowing owners to terminate leases early or relocate stores without the right to compensation and require tenants to provide monthly sales information to landlords.
Owners often don’t match information about the mall’s performance, SGTUFF said.
“Therefore, when it comes to negotiating lease renewal, landlords always have a very clear advantage in knowing exactly how to increase the price of rental charges based on their deep understanding of the tenant’s sales performance, while tenants have almost zero leverage. “
“These unfair terms have created a situation in which tenants end up bearing a very disproportionate share of the financial burden of business loss during the Covid-19 crisis.”
Most mall owners have not offered to offer rental assistance beyond the mandatory transfer of government property tax refunds, the group said.
While fair leasing legislation is an important first step toward creating a more symbiotic landlord-tenant relationship, it’s also worth looking at the incentive system for key stakeholders in real estate investment trusts (Reits), which they manage various shopping malls. , He said.
“Reit’s current incentives are much more focused on maximizing the rental charge per square foot rather than proactively working with tenants to drive traffic and business to stores in the mall.”
Property expert Christine Li, head of research at Cushman & Wakefield for Singapore and Southeast Asia, said owners should be aware that it may not be easy to find replacement tenants in these uncertain times.
“Since the Covid-19 pandemic is likely to be long-lasting, homeowners may not want to alienate or lose important anchor tenants or other key tenants who may have long-term leases and cannot be easily replaced.”
Allowing tenants to pay a reduced base rent with a higher gross turnover ratio can ease the rent pressure for tenants while encouraging them to transform their business models, Li said.
The outbreak should also serve as a wake-up call for retailers who have so far refused to adapt a strong online strategy, he added.
“It is imperative that landlords and tenants work together in partnership to survive,” said Ms. Li.
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