Newsletter

1. NEA restriction on F&B outlets without proper exhaust system.

The National Environment Agency (NEA) has enforced new rulings on the existing F&B outlets that do not have an exhaust system that can expel fumes out of the building.  It has started to enforce this ruling to those who are new applicants where the shops were taken over by new tenants.

Basically, F&B licenses can still be issued but there is no cooking allowed. (Without the approval to cook, what type of F&B outlet can one do?).  We are not sure whether when the NEA will also apply this ruling to the existing tenants who would need to renew their licenses every year.

The previous practice of taking over an existing F&B shop to continue with the same business is now being jeopardised or diminished by the new ruling.  Suddenly, owners may see their F&B shops rental and capital value devalued and the F&B trade withdrawn.

We advise owners to lobby and support the installation of a centralised common ducting system to continue operating as F&B business in Far East Plaza .

 2. Buyers' new criteria in buying shop.

The official word is out that the peak of the property market is now over and the market will continue to soften throughout this year and perhaps, beyond. Some of the factors that will continue to affect the market would include:

1. The American’s economy slow demand for goods and service in Asia .

2. The American sub-prime financial crisis affecting credit and bank’s willingness to take risks.

3. The high oil and food prices resulting in inflation.

4. The cutting down of business investment as profits are diminishing and deteriorating.

5. The extra supply of shop space coming out of the market from 2009 to 2011.

6. The cutting down of consumer spending on non-essential or luxurious items.

Those who are still buying shops are either end-users for their businesses, or existing tenants being pressed by high escalating rents or contrarian-investors who take greater risk to buy but would expect a higher yield of 6% or more of the rental income.

Those who are still buying can now expect very attractive yields and asking prices and if they can have the holding power or deep pockets, they will be able to reap huge rewards when the market recovers.

With the increase of petrol at 41% and diesel at 63% in Malaysia on 4 June 2008 , there would be an impending increase in cost for most of the households, foods and vegetable prices in Singapore . The impact will snowball and the effect felt as more items which we take for granted or are at marginal values will start to rear its ugly head and prick the consumers’ fingers.

Such a scenario of escalating costs will continue to be played throughout the year 2008.

3. Devotion and Specialization will save the day

While there were many talks about the depressing state of the world and regional economies, we really started to feel it in the month of May 2008. Such similar symptoms were earlier felt during the short-lived SARS (Severe Acute Respiratory Syndrome) period in March 2003. The symptoms include:

1. The tenants were asking for rental reduction.

2. The tenants were asking for assignment of tenancies. (Business takeover)

3. The tenants were delaying the rental payment.

4. The tenants could not afford to pay rent.

5. Shops for rent were not taken up or the demand has been lethargic.

6. The final rental rate agreed upon was much lower than what the landlord expected and if for sale, the yield was at least 6% or priced at a steep discount.

We would expect such rental delinquency to continue as the retailing market gets more difficult owing to high cost and lower purchasing powers.

During the last 3 years, when the going was good and everyone enjoyed greater income and the rental were increasing and demand for retail space were much sought-after, owners and landlords had an upper hand in choosing tenants. Such trends will change very soon!

As a de facto shop specialist and having established an on-site office in both the Far East Plaza and Sim Lim Square , we believe we would be much more ready to assist the owners and tenants here.

Our strategies of specialization and devotion to these 2 shopping centres will hereafter show our strength in serving the business and investment needs of the tenants and investors and we will be able to mitigate the loss of vacancy or bridge the critical time gap to find a tenant and to minimise the loss of the rental income.

(Those who would need our specialised knowledge and service including the valuation opinion of how much their shop is worth for rent / sale are welcome to call us at HP 96736477 or TEL 67326266.)