Reasons and Trend of Vacant Commercial Units and Impact of High Rents on Business Viability and Growth

Mr Gerald Giam Yean Song asked the Minister for National Development (a) what has been the trend of vacant commercial units in Singapore over the past three years; (b) whether this is due to landlords holding out for higher rents to secure better valuations; (c) what impact do persistently high rents have on business viability and growth; and (d) whether a vacancy tax is being considered.

Mr Chee Hong Tat: My response will also cover matters raised in the question by Mr Kenneth Tiong scheduled for a subsequent Sitting.

Vacancy rates for commercial properties have remained stable over the past three years at around 7% for retail spaces and around 11% for office spaces, comparable to pre-COVID-19 levels. Landlords are unlikely to leave their properties vacant for too long, as prolonged vacancy could affect property valuation and limit capital appreciation. It is also not financially sustainable for the landlord to incur holding costs, such as property tax and mortgage repayments, as well as opportunity costs from foregone rental income. Given these considerations, we do not see a need to impose a vacancy tax on commercial properties.

We acknowledge concerns from some retail and food and beverage business owners that their business costs, including rents, have risen. At an aggregate level, rent increases of private retail spaces have trended below the inflation rate in the past three years. At a local level, there will invariably be differences in the rents, with some commercial properties commanding higher rents due to their more attractive attributes, such as shopping malls integrated with mass rapid transit stations. For more cost-conscious businesses, a variety of lower-cost options remain available.

The Urban Redevelopment Authority publishes detailed rental data every quarter, which offers the public and businesses sufficient insights to make well-informed leasing or investment decisions.