Squeeze could lead to big job cuts, says SRA; CapitaLand to 'customise' solutions
(SINGAPORE) Up to 20,000 retail employees - 20 per cent of the sector's workforce - could be retrenched unless store rents are slashed, the Singapore Retailers Association (SRA) said yesterday after an emergency meeting.
Members' income has dived 20-30 per cent in the past few months, said SRA, which represents close to 300 retailers.
The main issue - and of critical concern - is high rents demanded by landlords 'who apparently lack an understanding of the plight retailers are facing', SRA said. But CapitaLand, which is Singapore's biggest retail landlord, listed out the steps it had taken to help retailers and said it would work with its tenants individually to customise solutions for them.
SRA, meanwhile, said that occupancy costs have climbed 50-80 per cent over the past three years. But with sales margins shrinking, landlords have been slow to acknowledge or respond.
'Initiatives offered to date are inadequate as they do not address the main concern of the retailers - that of cost containment in these difficult times,' SRA said.
Rent cuts of at least 20-30 per cent are an 'absolute necessity', it said in a statement. 'The industry is asking only for this, as the bare minimum, to ensure survival.
'Landlords and tenants exist symbiotically. It has to be understood that a strong partnership is necessary to ensure the survival of all parties in this current period, so there is a future to look forward to.'
Members' margins are now 'almost negligible, if not negative', the SRA statement said. 'With such a contraction, the industry is seriously concerned about the possibility of store closures. Unless occupancy costs are reduced, we are fearful that up to 20 per cent of our employees may be retrenched as a result of store closures.
'This could mean 20,000 people out of work - a major concern for retailers, and Singapore, and something the industry would not want to happen.'
SRA said other industries that feed off the retail sector - such as the media, food and beverage, and advertising - could also face job losses as a result of retailers' woes.
SRA said its members have agreed to share information more frequently and more openly - as a 'result of landlords' continuing reluctance to accede to the retail industry's pleas for rental rebates, with some even proposing rent increases'.
Misinformation has resulted in some retailers committing to lease agreements they otherwise would have thought about twice, or even three times, SRA said.
The shared information is expected to make retailers more aware of what their peers are doing.
A spokesman for CapitaLand pointed out, meanwhile, that after this year's Budget, the group had committed to pass on the 40 per cent property tax rebate to CapitaLand Retail and CapitaMall Trust tenants in full. A part of staff bonus was paid in the form of shopping vouchers to support tenants across 12 CapitaLand malls.
The spokesman also said that the most scientific way to look at sustainable rent was to look at each retailer's occupancy cost (rent/gross revenue).
'As a landlord, we are mindful that it is important that our tenants do a viable business so as to create a win-win situation. Thus all renewals are reviewed on an individual basis, based on their sustainable occupancy cost,' the spokesman said. 'We continue to stay close to our retailers, work with them individually to better understand the specific issues that they are facing, so that we can customise a solution jointly with them.'
Source: Business Times, 27 Feb 2009