Speech at the Second Reading of the Leased Agreements for Retail Premises Bill by Jean See on 3 August 2023

Thank you, Mr Speaker. The introduction of the Lease Agreements for Retail Premises Bill is timely.

Many small businesses were hard-hit during Covid-19. Schemes such as the Self-Employed Person Income Relief Scheme, which the NTUC had assisted the Ministry of Manpower to administer, gave some respite to many self-employed business owners.

Post-pandemic, businesses are starting to find their footing. Some businesses have transitioned to online shopfronts. Others still choose to operate as retail tenants. They include enrichment centres, gyms, and photography studios.

Some of these businesses belong to self-employed persons who are also members of NTUC’s associations for coaches and instructors, and creative professionals. These self-employed business owners support the Bill as the Bill sets out guidelines enabling fairer lease negotiations between retail landlords and tenants. The Bill also deters landlords from terminating lease agreements because of sales performance.

Shop rental is a significant operating cost to self-employed business owners. To move towards fairer rental structures and profit-sharing clauses in the lease agreements, business owners suggest guidance. This guidance could be from the government and market leaders.

Their suggestion stems from three concerns:

First, sudden and drastic increase in rental cost destabilises small businesses. Post-pandemic, some saw steep rental increase of 15 to 40% compared with pre-Covid levels. This left many small businesses in the deep end. Landlords cited inflation, higher expenses, and opportunity costs to justify rental hikes. Self-employed tenants struggled to cope. Many had depleted their savings during Covid and were in a state of financial flux. Self-employed businesses located in non-retail commercial properties also shared this concern.

Second, a vibrant business ecosystem encourages a variety of business forms to co-exist. We respect landlords’ right to pursue profitability. Even so, what must change for small businesses to co-exist with big tenants with deep pockets? For example, landlords could calibrate rental adjustments over a longer period. This would allow small businesses time to adjust their business models. Landlords could also share how they derived various costs like base rent. This would help tenants to appreciate the extent economic factors impact retail rents and provide them with lead time to communicate fee increases with customers.

Third, labour is often the next most significant operating cost following rental. Thus, business owners might shift towards flexible labour to counter higher rental costs. For instance, staffing might consist of short-term contracts and gig-based freelancing arrangements. While this increases business flexibility, it is at the expense of worker income security. If rent remains an uncertainty for business owners, “flexibilisation" of employment could become more appealing. This is an area of concern as worker precariousness cannot be an outcome of business survival.

Emerging from the pandemic, small businesses have been bracing themselves for various headwinds. The Lease Agreements for Retail Premises Bill is a step in the right direction. It helps to balance the bargaining power between landlords and retail tenants.

Self-employed business owners are aware of their vulnerabilities in a VUCA environment. They thus look to the government and market leaders to guide fair play and practices. This is important to the development of a sustainable and vibrant business ecosystem - one where self-employed business owners and their workforce can thrive, and where consumers can benefit from the diversity and affordability of goods and services. Notwithstanding the suggestion, the Bill gives assurance to small businesses.

Mr Speaker, I support the Bill.

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