GLUT IN OFFICE/SHOP PREMISES

Maj Fong Sip Chee asked the Minister for National Development (l) if he will enlighten the House whether the glut in office-shop space is (a) the result of over-building; (b) the consequence of a deliberate government policy to suppress rentals for office-shop premises; or (c) due to a depression in the economy peculiar to Singapore or any other reasons; (2) if the Development and Construction Company Private Limited, a subsidiary company of a statutory board, was the first to announce a reduction in rental; (3) if it is not logical that a similar reduction in rental should be applied to shop premises under the Housing and Development Board; and (4) if the Minister is satisfied that the glut is due to over-building, whether he will consider it prudent in the circumstances to prevent such profligacy of public funds by way of restraining the public sector in the development of commercial buildings.

Mr Teh Cheang Wan: It has never been the government's policy to deliberately suppress rentals by over-building office and shop premises. The commercial premises built by the HDB in its estates are to meet the needs of residents. The URA and HDB also build office and shop complexes to cater for the needs of resettlement cases. Some ministries and statutory boards have built their own office buildings. In their planning to cater for their long-term needs, they may have built space that is in excess of their immediate needs. They therefore have some surplus space for rental. The Minister for Finance has announced in his Budget Speech that the government will not build any more commercial buildings unless there is a need for them.

To build or not to build an office and shop complex is basically a business decision. When there is demand or when developers perceive that there is a demand, they will go ahead. This happened between 1980 and 1983. As a result, there is an over-supply of office and shop premises now. The current poor business situation has also not helped.

To attract more tenants, developers began to reduce rentals for office and shop premises. The Development and Construction Company (Private) Limited followed suit.

Unlike private developments, HDB commercial premises are let out on monthly tenancies with rentals determined by the tender system. It would not be good for the HDB to start reducing its rentals because of poor business. Businessmen know that if the HDB is prepared to reduce rentals because of poor business, they will not mind submitting high bids in order to get a shop unit and subsequently appealing for a reduction in rental because of poor business. This will make tender bids extremely high and is not beneficial to the economy. The HDB does allow businessmen, who are unable to continue paying their rentals, the option of terminating their tenancies and re-tendering for the same or new premises at a lower rental.