Senior Minister of State Koh Poh Koon oral reply on business costs

Question

Mr Leon Perera: To ask the Minister for Trade and Industry (Industry) how do the absolute and relative costs (as a percentage of total expenses) of owning or renting property borne by SMEs and start-ups in Singapore compare to countries with a strong start-up and SME sector, including Germany, Switzerland, Israel, Japan and the USA.

Oral Answer (to be attributed to Senior Minister of State for Trade and Industry Dr Koh Poh Koon)

1. In line with global norms, purchases of property are considered as additions to fixed assets and do not form part of business costs.

2. As for rental costs, these generally make up a small share of total business costs for SMEs in Singapore. In 2016, rental costs constituted between 0.4 and 5.3 per cent of SMEs’ business costs in the manufacturing sector, and 8 per cent or less of SMEs’ business costs in most services sectors. Although the rental cost share for SMEs in the retail sector was higher at around 30 per cent, retail rents have been on a decline in recent years, falling by 16 per cent from 2014 to 2017. Similarly, office rents have fallen by around 14 per cent since peaking in 2015, while industrial rents decreased by 13 per cent since peaking in 2014. In absolute figures, the median rental per square foot per month in the last quarter of 2017 was about $9 for office space in core business areas and close to $5.50 in other areas; almost $10 for retail space in Orchard Road and about $5.50 in other parts of the central area. For industrial space, the median rental per square foot per month in the last quarter of 2017 was about $2 for multiple-user factory space and about $4 for business park space.

3. On the back of the decline in rentals, only 13 per cent of the 2,500 SME respondents in the 2017 SME development survey conducted by DP Information Group cited high rental costs as one of the top business concerns in 2017, representing a decrease from 18 per cent in 2015. While the Government does not collect data on rental costs borne by SMEs and startups in other countries, property consultancy studies show that Singapore’s rents are generally competitive or comparable to similar cities in the United States, Switzerland, and Japan.

4. To ensure that there continues to be sufficient commercial and industrial space to meet demand and support economic growth, the Government releases land for private-sector developments through the various Government Land Sales (GLS) programmes. JTC also develops innovative industrial facilities with shared services to help SMEs reduce capital expenditure and operating costs. To support startups, JTC has developed startup clusters known as LaunchPads. As startups may have different space requirements, JTC offers options ranging from bare units to units with air-conditioning and ready power provision. The startup community has taken well to the Launchpads.

5. The Government will continue to closely monitor the industrial and commercial property markets and ensure the stability and sustainability of rentals for businesses over the medium to long term.