COVID-19 SPECIAL

Landlords can do more to help themselves

In current bad times, if tenants leave, they'll lose even more

Japan Food Town at Wisma Atria was one of the early casualties of the economic downturn - it closed down at the end of February. If restaurants are shuttered one by one, malls will start losing the patronage of their regular customers - slowly but su
Japan Food Town at Wisma Atria was one of the early casualties of the economic downturn - it closed down at the end of February. If restaurants are shuttered one by one, malls will start losing the patronage of their regular customers - slowly but surely. If the overall footfall in the mall drops, the chain effect will affect all other shops in the mall.ST FILE PHOTO

For many owners of small businesses, their biggest cost is likely to be their monthly rent.

While many sole proprietors and even their small team of employees are now taking a big cut in income due to the coronavirus pandemic, they still need to keep up with the rent.

And if things do not improve, they will have to dig into their families' savings, if they are desperate to keep going.

The bad news is that even with such drastic measures, they will not last long unless they get a reprieve from their landlords.

Just how bad can things go from here? Very, if we just look at Hong Kong, which has been pummelled by both the pandemic and civil unrest.

One in four shops in the once shopping paradise, notoriously famous for having retail units that command the highest rents in the world, could be gone by December if sales do not improve. Landlords there are willing to offer rent discounts of only up to 20 per cent, a far cry from their tenants' demand of more than 50 per cent.

In Singapore, similar cracks are already showing. A recent survey by online reservation platform Chope revealed that 42 per cent of restaurants, or about two in five, said they would not be able to last beyond two months at the current rate of cost and revenue, while 81 per cent said they cannot survive beyond six months.

A message that has recently gone viral on WhatsApp shows that a number of well-known eateries here have already become victims of the Covid-19 fallout.

You know all is not well when the Government has to step in on rent matters. On top of an earlier property tax rebate, cash grants as well as a new rule that mandates that landlords waive up to two months of rent were unveiled in the recent Fortitude Budget.

This means that qualifying tenants of commercial properties stand to get a rescue package of up to four months' worth of rent.

During the circuit breaker, I got a peek at how hard times can hit restaurants, even though they can stay open.

 
 

In early April, I went to my optician at a new mall close to Marina Bay to replace my spectacles. I saw a few new restaurants there serving a variety of Asian cuisines, and made a mental note to try at least one of them during my next visit.

But sadly, when I returned to collect my spectacles a few weeks later, all these restaurants were gone, leaving only empty units.

My guess is that the restaurants could not earn enough to pay their rent, and hence decided to cut their losses and leave. This makes me wonder whether landlords here can do more to help their tenants because by doing so, they are actually helping themselves.

LOSS LEADERS

This is a retail strategy that is often used by supermarkets: By deliberately pricing selected products really low, they hope to attract shoppers who would likely buy those items as well as other regular-priced items.

Mall owners should treat some of their tenants as "loss leaders", especially if they attract people to the malls. Restaurants have this unique ability and many malls know this.

In the face of the onslaught caused by online shopping on retail shops, many malls have started to devote more space to house restaurants.

So it makes absolutely no sense to let their crowd-pullers go, especially now.

 
 

For example, the owner of that new mall should have tried harder to keep its tenants - I would even go as far as to offer a "rent-free, just pay for the utilities" package for now.

Anything is better than the current result, which is lose-lose - the restaurants are gone and the mall becomes eerily dark and quiet. It is unlikely that the mall will be able to find new tenants now when the last ones left because of rent and poor business.

DON'T MAKE YOUR COMPETITORS STRONGER

Even kids know by now that food outlets are essential in a crisis and that's why they can remain open in a lockdown. When you allow the restaurants in your mall to leave, where do you think your other tenants and potential customers in the area would go to buy food? The nearest malls which have food outlets, naturally.

So by allowing your own outlets to close, you will end up driving more business to your competitors and indirectly make them more vibrant. To make things worse, even your own tenants are giving business to your competitors if they are forced to go elsewhere to get food.

No generals have ever won wars by first killing their own men instead of targeting their enemies.

Instead of being in a no-win situation, landlords could perhaps strike a deal with their tenants, in which they can stay rent-free but in return, they have to help drive up traffic by dishing out super deals to attract more customers.

THE MALL AND TENANTS ARE PART OF THE SAME TEAM

All of us have our favourite malls and we like them because they are an ecosystem that suits our taste.

Restaurants usually rank quite high in our choice of malls to visit because, in better times, no weekend outing is complete without a good meal.

So if restaurants are shuttered one by one, malls will start losing the patronage of their regular customers - slowly but surely. If the overall footfall in the mall drops, the chain effect will affect all other shops in the mall.

 
 

What will make it even worse for the landlord is when a brand-name restaurant closes. When superstar Jay Chou's restaurant in Taipei closed recently, the bad news made headlines globally. Who would dare take up the empty unit when even the last famous tenant failed?

Don't be fair-weather landlords. Look at things from the tenants' perspective. When they started a business, they would probably have invested their life savings and perhaps even their souls to try to make the business a success.

What this means is no one would actually set out to fail - no one could have foreseen that a virus could have such a devastating effect on our lives. So, in times like these, landlords should lend a helping hand to nurse their own customers back to health.

If these customers vanish, the landlords probably won't see new ones for a long time too.

Too be fair, I don't think tenants are asking for charity - like all workers, all they want is a fighting chance to last through the crisis so that they can prove their mettle and stand up proudly once again.

One helping hand that landlords can extend is to offer a win-win solution, such as a new deal which will see tenants share a portion of their takings every month in lieu of rent until good times return.

Those who do this stand to earn something more valuable than money - goodwill - from being landlords with hearts. Such businesses not only enjoy loyal customers, but they also tend to attract even more new ones when news of their good deeds travels.

 
 

Deputy Prime Minister Heng Swee Keat has rallied Singaporeans to brace themselves for long and hard times ahead. The Government has even taken the major step of using the national reserves to help everyone.

But there is a limit to what the Government can do to help. Landlords can do more to help themselves. They should not be short-sighted in just maximising revenue now for short-term gain, for that is likely to eventually cause them long-term pain.

 
A version of this article appeared in the print edition of The Sunday Times on June 07, 2020, with the headline 'Landlords can do more to help themselves'. Subscribe