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A temporary adjustment on retail rent calculations, among others, is being requested by struggling retailers, as well as food and beverage (F&B) operators for the duration of the “unprecedented” COVID-19 outbreak, reported CNA.
Most retail leases are presently structured around a base rent or a minimum fixed charge, allowing only a small component for a tenant’s gross turnover or total sales.
Considering the drastic drop in sales, tenants hope that rents would be solely based on their gross turnover instead for the next few months.
This ongoing struggle between commercial landlords and their tenants over rental rebates already emerged as early as February when Covid-19 started driving both tourists and locals away from public places.
However, the call was further intensified by recent public health measures imposed by the authorities which further discouraged consumer spending.
For instance, the Singapore Retailers Association (SRA) compared the stricter safe distancing rules requiring shopping malls to implement crowd-limiting measures to a “lockdown situation” which may lead to more retailers obtaining “zero sales”.
“And yet our fixed costs of rental, manpower (and) utilities are still payable – all resulting in even greater costs and losses for retailers,” it said.
In this regard, the industry group wants rents to be no more than 15% of a tenant’s gross turnover for six months or for the base rent to be cut into half, whichever is lower in order to prevent “massive permanent store closures and loss of jobs within the next three months”.
Aside from this, SRA also calls landlords to allow businesses “who cannot sustain anymore” to terminate their leases before its expiration without risk of legal action or forfeiting their security deposits “in the spirit of a fair symbiotic relationship”.
“SRA is calling out to landlords once again to help retailers overcome this unprecedented crisis with unprecedented rental relief measures,” SRA said.
These calls were supported by SG Tenants United for Fairness, an informal group of retailers formed in recent weeks to rally for help, opining that businesses have been in “severe crisis” since 23 January when Singapore confirmed its first Covid-19 case, and the situation only worsens in the middle of “ever-tightening” distancing measures.
“We have worked out that the Government Budget measures announced so far, together with the small and the scattered mall owner measures, will only help cover for businesses losses incurred in February and March,” it noted.
The group also called landlords for the immediate passing of the expanded property tax rebates to tenants, pursuant to the Resilience Budget “without delay and with no conditions attached”.
The Restaurant Association of Singapore (RAS), for its part, also called on landlords to urgently translate such rebates into savings for tenants.
RAS assured that it will continuously negotiate with landlords and has already requested for rent calculation adjustments based on gross turnover alone for the next six months. It can be recalled that RAS also called for a 50% rental rebate for three months previously.
Frasers Property Retail, on the other hand, already rolled out additional rental rebates worth $45 million for tenants across its 14 malls in Singapore on 27 March. Aside from this, tenants will also get the full property tax rebates under the Resilience Budget. Cash security deposits will also be released in in lieu of one month’s worth of rental payments.
“While we ensure every one of our tenants is supported, these measures are prioritised by individual needs and circumstance,” said Frasers Property Retail spokesperson.
As for CapitaLand, it will suspend rents for tenants that have been ordered closed by the Ministry of Health from 26 March to at least 30 April, aside from the additional rental rebates it announced.
“Effectively, tenants most affected by COVID-19, including those in the F&B and fashion trades, will have their rents waived for two months from April to May 2020,” said CapitaLand spokesperson.
Meanwhile, Enterprise Singapore (ESG) helped facilitate some of the meetings between RAS, SRA, tenants and the landlords.
“We continue to encourage landlords and tenants to engage each other constructively, to listen to and understand each other’s situation, and work together towards a win-win solution for both parties,” said ESG’s deputy chief executive officer Ted Tan.
For the government’s part, Deputy Prime Minister Heng Swee Keat assured that the government is prepared to take the necessary legislative action in order to make sure that the property tax rebates will be passed on to tenants during the COVID-19 outbreak.
A new bill will be also be introduced in Parliament next week in order to provide temporary relief against the tenants’ contractual obligations during the crisis, and to protect the business as well.
For instance, the bill will prevent landlords from evicting tenants who were unable to pay rent in February and March or repossessing their premises.