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Industry players believe tighter financing and rising rents are putting pressure on the cash flow of retail companies.
In fact, the latest national business survey by the Singapore Business Federation (SBF) found that 43% of Singapore retail and hospitality companies experienced a credit crunch over the last few months – with retail companies accounting for more than 50%, reported The Business Times.
Moreover, Q4 data from the credit bureau revealed that payment delays within the retail sector worsened quarter-on-quarter.
“Banks will look at retailers’ balance sheets and inventories, among other things. If they are not doing well, banks will cut the amount they give out. Right now, retailers are not doing well,” said Singapore Retailers Association President R Dhinakaran.
Government data last November showed that the sector registered a 10-month drop in sales.
Industry players also pointed to rent – which takes up a significant portion of costs and have been on the uptrend – as a major factor compounding cash flow issues.
Latest Urban Redevelopment Authority data showed that retail rents within Singapore’s central region increased 2.3% in Q4 2019, which is the same rate of increase seen during the previous quarter.
Referring to the survey finding, SBF Chief Ho Meng Kit said: “They struggle with higher property rentals more than other sectors.”
Mothercare and KC Group, which owns beauty businesses, observed that landlords continue to raise rents even as the outlook is less-than-rosy.
“Even last year, when the economic situation was quite tough, the rental situation didn’t adjust in tandem with the market outlook,” noted KC Group Director Bernard Ng.
One particular landlord even tried to increase rent by 25%, he added.
Meanwhile, Lendlease, which manages malls such as Jem and Paya Lebar Quarter, shared that it has “processes in place to manage rental payments”, and that it has not witnessed any increase in late rental payments so far.
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