Singapore's Retail Rent Squeeze: Can Targeted Rules Protect Small Businesses?

A 57% Rent Increase Brings the Debate Into Focus

Flor Patisserie closed its Siglap Drive outlet after facing a 57% rent increase, with its landlord seeking $8,500 a month for a location far from MRT access. The Japanese inspired bakery's experience captures the pressure facing some of Singapore's small businesses, even as broad rental figures show much smaller changes.

The landlord cited "market rates" based on asking rents for empty units rather than prices agreed in completed transactions. Nearby businesses were paying substantially less. For a shop deciding whether it can afford another lease, the gap between a landlord's expectations and the revenue a location can generate can determine whether it stays open.

As of July 29, 2025, the argument over Singapore's retail rents reaches beyond individual lease negotiations. Bakeries, bookstores, independent gyms and specialty shops have closed, citing rental increases as their main reason. Business owners, industry groups, policymakers and the public are debating whether government intervention could protect small businesses without weakening investment in retail property.

Some regard those closures as the normal turnover of a market economy. Others see the loss of independent businesses as a threat to neighbourhood character, local employment and the willingness of entrepreneurs to start something new. The central policy question is whether targeted protections could give smaller tenants more predictable costs while allowing landlords to respond to demand.

Why Landlords Have Reasons to Seek Higher Rents

Singapore abolished the Control of Rent Act in 2001, removing formal rent controls and leaving market forces to determine prices. Commercial rent has long been a challenge for businesses, but the pressure has intensified in recent years.

Landlords, including major real estate investment trusts, or REITs, and companies linked to the government, have several reasons to seek higher rents. Rental income provides an immediate return. Higher income can also lift a property's valuation, supporting better financing terms and a higher resale price. A REIT is an investment structure through which investors hold an interest in properties that generate income.

Prime locations and suburbs undergoing gentrification face particular pressure because demand is strong and space is limited. Landlords may be able to leave units empty while waiting for international chains or local brands with substantial financial backing to accept higher rents.

Small businesses have less room to wait or compete. Their ability to pay depends on what they sell, the customers they attract and the other bills they must meet. Flor Patisserie's experience illustrates how a property's expected investment return can become disconnected from what an individual business can sustain.

Why Modest Rental Averages Can Hide Sharp Increases

Figures from the Urban Redevelopment Authority and property consultancies show that average retail rents in the Central Region have remained relatively flat since 2020. Those broad trends sit alongside accounts from tenants facing much steeper increases when their leases come up for renewal.

Knight Frank's report for the first quarter of 2025 put the rise in prime retail rents across Singapore at 0.3% compared with the previous quarter. Orchard Road rents rose 2.7%, while rents on the city fringe fell 0.3%. Suburban rents increased 0.3%.

The figures describe leases that were agreed, rather than the asking prices landlords put forward. A tenant negotiating a renewal may therefore encounter a proposed increase that is much larger than the average movement in completed deals.

Business owners say the market rate cited in negotiations is often drawn from speculative asking prices. When empty units are advertised at high rents, those advertised figures can influence negotiations even before another tenant agrees to pay them.

More detailed and transparent data would help show where the pressure is concentrated. Without a closer view of individual areas and different types of tenants, policymakers have difficulty measuring how many small businesses face steep increases and where intervention might be most useful.

What the Pressure Means for Shops and Customers

Rent can take 30% to 50% of revenue for small and micro businesses. At that level, a substantial share of each dollar a customer spends goes towards keeping the premises, before the business pays its other costs or sets money aside for investment.

Large chains generally have more resources to absorb an increase. Independent businesses often operate with thin profit margins and limited ability to raise prices. Passing costs to customers can also weaken demand if shoppers decide that meals, goods or services have become too expensive.

More than 3,000 food and beverage establishments closed in 2024, the highest number since 2005. The sector also recorded 3,793 new outlets, showing substantial activity alongside the closures. Many businesses struggle to survive beyond their first lease.

Nicher bakery and Neue Fit gym have publicly described rental pressures. Increases cited by retailers range from 15% to 57%, with warnings that further rises could force businesses to close.

Independent shops also provide places where customers know the owners, local people find work and neighbourhood relationships develop. Business owners and industry groups argue that replacing distinctive shops and eateries with franchises and international brands can make different districts increasingly alike.

Customers face a concrete tradeoff. Higher prices can keep a familiar shop operating, but reduce what households can afford. Closure may remove a service from the neighbourhood altogether, along with the relationships and local identity built around it.

Landlords and Tenants Disagree Over Affordability

Mall landlords face pressure to maintain returns for investors. High occupancy and strong demand can allow them to hold rents steady or increase them, even while some individual units remain empty for extended periods.

A focus on rental yields, the income generated by a property relative to its value, can favour immediate financial returns over the longer survival of a particular tenant. Business owners argue that this can put neighbourhood variety and the sustainability of smaller shops behind property income.

Landlords warn that rent controls or extensive government intervention could discourage investment in retail premises and reduce their quality. They argue that leases need enough flexibility to reflect market conditions, and point to distortions associated with controls in some housing markets.

CapitaLand's Ervin Yeo has drawn attention to occupancy cost ratios in the debate over affordability. These ratios measure rent as a share of sales. A relatively stable ratio can suggest that sales are keeping pace with rental costs across a group of tenants.

Critics argue that an average ratio can conceal much higher burdens for small businesses and may leave out additional fees. They also say a stable ratio can coexist with rising consumer prices if businesses increase prices to cover their costs. The disagreement is partly about which measure best reflects the experience of tenants with the least financial room.

A Tenant Group Calls for Changes to Rental Rules

Singapore Tenants United for Fairness, known as SGTUFF, represents more than 700 local business owners. Its white paper calls for urgent rental reforms, bringing together proposals on lease renewals, vacant premises, access to retail space and competition from foreign operators.

The group's recommendations include:

• Capping rent increases at lease renewal and linking them to the Consumer Price Index, or CPI.
• Allocating more prime retail space to local businesses.
• Penalising landlords who leave shop units vacant for more than three months.
• Introducing additional property taxes or restrictions on foreign commercial tenants.
• Reducing foreign worker quotas and increasing levies for operators that are not local.

The CPI tracks changes in consumer prices. Linking rent increases to it would make renewals more predictable while allowing rents to move with inflation. SGTUFF draws inspiration from practices in Japan and Sweden, where commercial rent increases are often indexed to inflation, and from San Francisco's Commercial Vacancy Tax.

Public sentiment is largely supportive of intervention, with people sharing accounts online of local businesses closing and international brands taking their place. Others defend the current system as a response to supply and demand, or argue that competition from online shopping poses a greater threat to physical stores.

What Targeted Intervention Could Look Like

Singapore has a history of government intervention in markets such as housing and labour. The retail debate centres on whether rental pressures now justify action to limit wider damage to businesses and communities.

Some experts and business groups favour targeted, transparent measures instead of controls across the entire market. Options include limiting increases in selected precincts, providing protections for particular types of business and tying rent rises to inflation.

A modest vacancy surcharge or a tiered property tax could give landlords a financial reason to find tenants sooner. Such measures seek to change the calculation behind leaving a unit empty while waiting for a higher offer.

Another proposal is to strengthen the voluntary Code of Conduct for Leasing of Retail Premises and make it legally enforceable. Stronger lease protections could give tenants greater certainty about the terms governing their premises and the process for renewal.

These proposals seek a balance between flexibility for property owners and stability for businesses. A cap in a selected district would address a narrower set of premises than a nationwide ceiling. Protections aimed at certain businesses would similarly concentrate assistance rather than apply the same rules to every tenant.

No decision or implementation date for these proposed interventions is given. The debate remains focused on which measures would address rental pressure while preserving investment and allowing retail areas to adapt.

More Space, Better Data and Help Testing New Ideas

Urban planning offers another route to easing pressure. More flexible zoning could allow underused office premises to become retail space, increasing the supply available to businesses.

Better rent monitoring could support that approach. Detailed information about locations, lease terms and the increases facing different tenants would help identify districts at risk of losing independent businesses. It could also help policymakers direct support towards the places where pressure is greatest.

Enterprise Singapore and CapitaLand have launched the Retail Maverick Challenge, which offers local brands with innovative concepts up to a year of free rent and financial support. The scheme gives retailers a way to test ideas without immediately carrying the full pressure of a lengthy lease.

Such support serves a different purpose from regulating renewal prices. It helps a business establish whether a new concept attracts enough customers, while rent protections address the costs an existing tenant faces when seeking to stay.

Malls can benefit from new local concepts as they develop into destinations for activities and experiences as well as shopping. The challenge is to provide room for experimentation while keeping operating costs manageable after initial assistance ends.

What Other Cities Have Tried

New York City, Seoul and San Francisco illustrate different approaches to the relationship between property owners and small businesses. Their measures and proposals address bargaining power, neighbourhood preservation and the cost of leaving premises empty.

New York City's proposed Small Business Jobs Survival Act would give tenants more bargaining power when renewing leases. Property owners oppose the proposal, reflecting the wider disagreement over how much control owners should retain over rental terms.

Seoul uses Commercial Area Preservation Zones, combining rent controls and incentives to retain small tenants and maintain neighbourhood diversity. The approach concentrates protection in designated areas rather than treating every commercial district alike.

San Francisco's Commercial Vacancy Tax penalises landlords who leave retail premises empty for extended periods. Its purpose is to encourage owners to lease space at rents businesses can sustain, including local operators.

Japan and Sweden provide examples of commercial rent increases often being linked to inflation. This can offer both landlords and tenants a more predictable basis for future payments.

These approaches have their own limitations and challenges. They also show that intervention can take several forms: stronger renewal rights, protection for selected districts, incentives to occupy empty premises or a more predictable formula for increases.

The Economic Stakes Extend Beyond Individual Leases

Higher commercial rents can reach households through the prices businesses charge. When retailers pass costs on, customers have less spending power. When businesses absorb the costs, they have less money available for hiring, wages, investment or developing new ideas.

Closures can also reduce opportunities for employment and entrepreneurship. A prospective owner must consider whether a business can survive its initial lease and whether a later increase could undo years of work building a customer base.

Critics describe a risk of a "rentier economy", in which a growing share of wealth goes to those who own property while businesses producing goods and services struggle to keep enough income to grow. They argue that reliance on real estate as an economic driver can become counterproductive if it squeezes productive activity and local creativity.

For Singapore, that concern connects economic performance with the identity of its neighbourhoods. A retail area can command strong property returns while becoming less accessible to independent operators. Business owners argue that preserving local variety deserves a place alongside financial measures of success.

Where the Policy Debate Stands

Property developers and landlords favour solutions driven by market conditions and cooperation between mall operators and retailers. Their proposals include temporary reductions in development charges to support the renewal of urban areas.

Tenant groups want stronger regulation, more transparent rent setting and recognition of the social value of local businesses. They argue that smaller tenants have too little bargaining power when negotiating with owners who can wait for a different occupier.

Policymakers face a choice about how to balance economic efficiency with community needs. Suggestions include testing rent stabilisation in districts important to culture and entrepreneurship, and rewarding landlords who lease to local businesses or retain tenants for longer periods.

The strongest case for targeted action rests on the gap between broad rental averages and the sudden increases individual businesses face. Singapore's policy debate is about how to respond to that gap while keeping premises occupied, investment viable and neighbourhood commerce varied.

Key Points

• Flor Patisserie closed its Siglap Drive outlet after a 57% increase, with rent sought at $8,500 a month.
• Prime retail rents across Singapore rose 0.3% in the first quarter of 2025, while individual tenants reported much larger increases.
• More than 3,000 food and beverage establishments closed in 2024, while 3,793 new outlets opened.
• SGTUFF, representing more than 700 local business owners, wants reforms covering renewals, vacancies and access to retail space.
• Policy options include targeted rent protections, vacancy charges, better rental data, flexible zoning and support for new local concepts.
• Landlords warn that extensive controls could weaken investment, while tenants seek more predictable costs and stronger bargaining power.