Rentals have increased to about 10% in 2007, 12% in 2008 and 15% this year.
The current financial reports of FJ Benjamin somewhat reflects the current situation of the retail industry, thus mall owners should find this the right time to cut rents to ensure survival.
Even after its struggle with cost-cutting measures, FJ Benjamin’s quarterly reports has seen a significant fall down after incurring a net loss. Its gross margins fell to 38 percent from 40 percent due to higher promotional activities. Staff costs also slipped 9 percent, and operating expenditures dipped 38 percent.
FJB CEO Nash Benjamin said it would need to “focus our efforts on working with our landlords to reduce rental and other overheads.”
FJB is among the top 10 tenants of Starhill Global REIT which holds shares in Ngee Ann City and Wisma Atria. The unwillingness of landlords to give considerable rental returns probably caused by the retail rental revenue generated at Wisma Atria of $11.56 million for the first quarter of this year that is down only by 0.8% from last year.
RSH, also a distributor and retailer of lifestyle and luxury brands, raised its voice against high rents as landlords continue to ignore retailers’ proposal. That is even after retail associations headed by the Singapore Retailers Association publicly requested landlords to reduce their rents by about 20-30%.
BT even reported that major mall owners remain dubious that occupancy costs were far above the ground. They even seem to be thriving. Many malls in Singapore are owned by REITs like Starhill Global REIT, Frasers Centrepoint Trust and CapitaMall Trust. All three of them reported rise in net property income. In fact, some are even increasing their rents when leases come up for renewal.
REITs are publicly listed entities; and as such, REIT managers are forced when it comes to providing rental rebates. They are left no choice if the retail industry is doing as badly as numbers prove.
“It’s better to lower rents than not have a tenant,” FJB’s Benjamin cleverly agreed.