Friday, March 20, 2009

Groups join forces to get rental cuts

SRA and 3 associations to share information to gain more bargaining power

THE Singapore Retailers' Association (SRA) has enlisted reinforcements in its continuing bid to get commercial landlords to lower rents.

SRA's move, started last September, has made little headway so far, despite repeated pleas and gloomy predictions from the association that many retailers will go under if something is not done soon.

To give its effort a fillip, SRA has brought the Restaurant Association of Singapore, the Singapore Jewellers Association, and the Textile and Fashion Federation on board.

In a joint statement, the groups said they were banding together because calls for rental rebates have thus far 'gone unheeded'.

They said joining hands would give them a new weapon in the fight: Shared information on rental issues, such as where retailers are taking up leases next and the rates they pay.

Such an exchange of information would be unprecedented, said Mr David Wang, vice-president of the Textile and Fashion Federation, which represents clothing exporters and local designers.

Retailers usually guard information about where they are opening next tightly to avoid giving competitors a heads-up.

Also, tenants are now contract-bound not to discuss what they pay in rent with others.

But SRA executive director Lau Chuen Wei said the group is working out how they can share information without breaching contracts, and is thinking of hiring a consultant to research this.

Taken together, this information will help retailers keep abreast of market rates and give them bargaining power.

All four groups say they are pressing their landlords for rental relief because the downturn has left their members reeling.

Singapore Jewellers Association president Ho Nai Chuen, for instance, said his members had seen business halved since the beginning of the year.

SRA has led the charge for lowered rentals since last September, when it made public announcements pressing landlords for rental rebates.

But so far, it has managed to secure a meeting with only one landlord, CapitaLand, which refused to budge on rents.

SRA has been giving increasingly dire predictions about the state of the industry.

Last month, it warned that if the stand-off with landlords continued, up to 20,000 jobs could be lost.

Despite being rebuffed repeatedly, it has continued to lobby the Government to cut the 7 per cent goods and services tax.

The refusal by commercial landlords to lower rents is in stark contrast to what government- linked ones such as the Housing Board, JTC Corp and the Sentosa Development Corporation, have done: A one-year rent cut of 15 per cent for all tenants.

Experts say the reason for this is that government-linked outfits are less driven by the profit motive.
But SRA's latest move is unlikely to get retailers any closer to their goal.

For one thing, the National Trades Unions Congress (NTUC) has said the employment situation in the retail sector is not as bad as in other sectors such as manufacturing or electronics.

NTUC's quality lifestyle department director Yeo Guat Kwang said last week that the union was not aware of massive job losses from the retail sector.

Several major landlords interviewed, including CapitaLand and AsiaMalls, said they are already passing on the Government's 40 per cent property tax rebate in full.

This works out to about a 4 per cent cut for tenants - but they say it is hardly enough to make up for dwindling business.

Mall owners say they prefer to spend on driving up customer traffic. None has decided to give a blanket rental rebate as yet, preferring to engage with tenants on a case-by-case basis.

A CapitaLand spokesman noted that different tenants have different profit margins, and some could well afford higher rents than others.

Landlords have been relying on promotions such as giving away free shopping vouchers and free gifts to attract shoppers and increase tenants' business.

SRA and its partners, however, are refusing to back down.

Mr Ho warned: 'If stores start closing down and the malls stand half empty, Singapore's image as a shopping paradise will be affected.'


Give us rebates
'Promotions like voucher giveaways will benefit some, but not everyone. Depending on the products offered, some shops might benefit more, others less, and some might get nothing. I think rental rebates and such promotions go hand in hand. A rental decrease benefits everyone and has a longer lasting effect, and it helps more.'

Mr Tan Yew Jin, business development manager of Alpha Sky, which owns shoe chain Schu. It has outlets in Wisma Atria and Suntec City

'Shopping voucher giveaways do help, but not so much. Customers at my shop tend to spend up to the voucher's value, and I usually don't make much additional sales. In the end, revenue from vouchers accounts for less than 5 per cent of my monthly sales. I think that the most direct way is still giving us a rental adjustment. If people don't want to spend, promotions won't really help, and the money put in to drive traffic may not be justified.'

Mr Samuel Chong, owner of aromatherapy and toiletries shop Salo in Liang Court

Promotions helping
'The focus of the promotions has changed from general market positioning or mall image advertisements to tactical promotions to reward spending at our malls and repeat visits. We have also focused on areas to help tenants, such as setting aside areas for our tenants' promotions and working with them on joint promotions whenever possible, to increase the awareness of their products.'

Ms Stephanie Ho, general manager of AsiaMalls, which owns six malls, including Liang Court, Tiong Bahru Plaza and the recently opened Tampines 1

'We have in place a slew of measures that we can activate to help our tenants, ranging from restructuring their leases, reviewing their space efficiency, exploring relocation or downsizing of stores, as well as working with tenants on various promotional fronts, such as pushing sales in atrium spaces, CapitaCard promotions and CapitaVouchers.'

A spokesman for CapitaLand Retail, which owns or manages 18 malls, including the 14 which are owned by real-estate investment trust CapitaMall Trust. Properties include Raffles City, Junction 8 and the upcoming Ion Orchard

Source: Straits Times, 20 Mar 2009

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