Singapore's retail landscape is experiencing a profound transformation, one that high-earning professionals and investors cannot afford to ignore. Whilst REITs continue to deliver robust returns to unitholders, the very businesses that occupy these properties are facing an existential crisis.
The stark reality emerged dramatically in May 2025 when beloved Japanese-inspired bakery Flor Patisserie announced the closure of its Siglap Drive outlet after facing a 57% rent increase upon lease renewal. This wasn't an isolated incident but part of a broader pattern affecting Singapore's small business ecosystem.
Singapore Tenants United for Fairness (SGTUFF), a cooperative representing small business owners, recently conducted a poll revealing that 96% of 109 small business owners in F&B, retail, and service sectors have never been offered lower rent for the same unit over the past five years. This statistic paints a concerning picture of market dynamics where rental costs only move in one direction—upward.
The numbers tell a sobering story. According to SGTUFF's analysis, a record 3,047 F&B businesses closed in 2024 and into Q1 2025. This represents not merely market churn but a systematic erosion of Singapore's entrepreneurial ecosystem, particularly affecting locally-owned enterprises.
Paradoxically, whilst small businesses struggle with rental affordability, Singapore REITs are delivering exceptional performance. CapitaLand Integrated Commercial Trust (CICT), one of Singapore's largest commercial REITs, reported impressive metrics for 2024:
These figures demonstrate the market's two-speed nature. As Professor Lee Kwan Ok from NUS Business School noted in a Channel NewsAsia commentary, "Many landlords can afford to wait for higher-paying tenants, often large chains, and may even prefer prolonged vacancies over leasing to independent businesses at lower rates."
The Business Times reported that Singapore-listed office REITs delivered resilient performance in H1 2025, with Keppel REIT achieving positive rental reversion of 12.3% and Suntec REIT recording 10% rental reversion alongside 3.7% distribution per unit growth.
SGTUFF advocates for using occupancy cost (rental expense as a percentage of revenue) as a key metric for assessing rental sustainability. Their research reveals alarming benchmarks:
SGTUFF positions 5-15% occupancy cost as the sustainable range depending on business type, suggesting that current Singapore levels may be unsustainably high for many small businesses.
The Urban Redevelopment Authority's Retail Rental Index presents a seemingly stable picture, with Central Region rents remaining relatively flat since 2020. However, this aggregated data masks significant variations at the micro-level.
Professor Sing Tien Foo from NUS Business School highlighted this limitation, stating that "there needs to be more transparent access to rent and other related data such as occupancy costs, as public rental data is too aggregated for tenants to accurately determine current market rents."
Current retail vacancy rates provide additional context:
SGTUFF has proposed comprehensive reforms addressing both immediate and structural challenges:
For high-earning professionals and investors, Singapore's commercial property sector presents compelling opportunities despite—or perhaps because of—the rental challenges facing small businesses.
S-REITs offered an average dividend yield of 6.8% as of May 2025, significantly outpacing the Straits Times Index's 5.1% yield and 10-year government bonds at 2.4%. This performance reflects strong underlying rental growth and high occupancy rates.
Key investment considerations include:
The government's response to rental pressures remains measured. Singapore's traditionally laissez-faire approach to commercial rents reflects confidence in market mechanisms, but pressure is building for targeted intervention.
Professor Lee Kwan Ok
suggests that "intervention does not have to mean drastically deviating from these principles, provided it is scoped, spatially precise and transparently implemented." Potential measures could include:
The commercial property sector faces several converging trends that sophisticated investors should monitor:
CBRE Research projects Singapore office rental growth of 2-3% for 2025, whilst retail rents in prime locations like Orchard Road may see similar increases.
For high-net-worth individuals and business owners, the current market presents both opportunities and considerations:
For Property Investors:
For Business Owners:
For Portfolio Construction:
Singapore's commercial rental market exemplifies the tension between market efficiency and social considerations. Whilst REITs deliver strong returns and maintain high occupancy rates, the sustainability of small business tenancy models faces genuine challenges.
For sophisticated investors, this environment presents opportunities in quality commercial assets whilst requiring careful consideration of regulatory risk and long-term market dynamics. The ultimate resolution—whether through market mechanisms or policy intervention—will significantly influence both investment returns and Singapore's entrepreneurial landscape.
The data suggests this tension will persist throughout 2025, making it essential for high-earning professionals to monitor both investment opportunities and potential policy changes that could reshape Singapore's commercial property market.
This article reflect on publicly available information and should not be considered as investment advice. Readers should conduct their own research and consult qualified professionals before making investment decisions.
Let us know what you think about this topic, and what do you want to hear next.
You can now be our community contributor and make a pitch to have your favourite personality be on our show.
Join our community group and drop us your insights on this topic.
Sources consulted: