Longer rent commitment for HDB shops may prevent overbidding, though not in prime areas: Analysts
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Aalysts cautioned that the move may not guarantee sensible bidding, as tenderers may still bid aggressively to secure shops in prime locations with high footfall.
PHOTO: LIANHE ZAOBAO
- HDB requires successful bidders for shops to commit to tendered rent for six years to encourage prudent bidding.
- Analysts note this provides rent certainty, but may not deter aggressive bidding for popular locations.
- Smaller businesses worry bigger firms still have advantage; small firms risk more committing to long-term rents.
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SINGAPORE – Requiring successful bidders for HDB shops to commit to their tendered rent for a longer term could help to curb speculative bidding, said property analysts.
It would help to prevent tenderers from overbidding in the hope that rents would be reduced in the next tenancy term.
But analysts cautioned that the move may not guarantee sensible bidding, as tenderers may still bid aggressively to secure shops in prime locations with high footfall.
The Housing Board announced on Jan 10 that bidders are required to commit to their tendered rent for two tenancy terms
It applies to those who successfully bid for any HDB shop, including coffee shops and medical facilities, to encourage prudent bidding.
This comes on the back of concerns over rising rents, after a general practitioner’s clinic in Tampines was rented out at $52,188 a month
Professor Sing Tien Foo, provost’s chair professor of real estate at NUS Business School, said HDB’s latest move will give bidders greater certainty about long-term rent while avoiding short-term rent fluctuations.
“It will rule out speculative behaviour by tenants, who may overbid to gain entry to the shop, hoping the rent will adjust downward when the lease is renewed in the second term,” he said.
However, Prof Sing noted that bidding behaviour would still depend on the demand for an HDB shop unit.
For instance, shops in popular areas with large market coverage – such as those in new Build-To-Order estates or near MRT stations – would attract more competition, and bidders may continue to bid aggressively to win, he added.
Ms Eileen Tan, senior manager of retail at real estate firm Knight Frank Singapore, also expects well-located sites with high footfall to be highly sought after.
She said businesses that require more capital investment to set up – such as restaurants and coffee shops – would need to spread the cost of their investment over a longer period.
“The six-year certainty in rents may thus encourage potential lessees to bid higher,” she added.
Previously, when a three-year tenancy was due for renewal, the rent for the next tenancy period would be assessed by professional valuers appointed by HDB.
Under the new measure, this assessment would be carried out after the second term. Subsequently, it would be done after each three-year term.
About 7,000 shops are rented out by the HDB, while about 8,500 HDB shops are privately held.
Mr Tan Yuan Ming, 33, a traditional Chinese medicine (TCM) physician who runs The TCM Folks, said the changes would not affect how his small business submits bids.
“You bid based on how much you are willing to stomach. I have always placed bids at an amount that I am willing to pay for the long term,” he said.
In 2025, he placed bids for HDB shops in Sengkang and Punggol but they were edged out by bids that were double his. He eventually leased a unit in Fortune Centre, a shopping mall in the Bugis area.
Mr Darren Tan, 35, who runs iCakes bakery, said he was thinking about the long term when he placed bids in 2019 and 2024 for the two HDB shops he is renting in Buangkok and MacPherson.
“I hope to sustain my business at the unit for the long term. No one wants to close down after just three years,” he said, adding that the six-year commitment is unlikely to change how he bids. He has no plans to bid for a third HDB shop.
His two outlets are located near MRT stations, which he secured after outbidding around six other tenderers each. He pays about $6,000 to $7,000 a month in rent for each of the units.
There are currently no penalties for tenants who terminate their leases within the tenancy period.
Mr Nicholas Mak, chief research officer at property portal Mogul.sg, said if there are no such penalties, some could continue to place high bids and back out before the end of the six-year period when they feel the bite of high rental costs.
But Mr Alan Cheong, executive director of research and consultancy at real estate firm Savills Singapore, said the fact that tenants need to reinstate the premises would be a deterrent to those who want to terminate their lease early.
Prof Sing said: “The early termination should not be seen as a way to encourage overbidding but rather, as a way to give bidders an exit clause to reduce their losses if their business plans and models fail.”
TCM physician Tan said that despite the changes, bigger businesses would continue to have an advantage over smaller ones.
Few HDB shops are set aside for TCM businesses so when a unit opens up, “everyone in the industry will fight for the space, which pushes rents up”, he said.
“It is scarier for me, as a small business, to commit to a high rent over a longer period of time. Bigger businesses may not feel the pinch,” he added.
Knight Frank’s Ms Tan said that it could be challenging for small business operators, who are more vulnerable to economic shocks, to commit to a six-year rent offer.
“This is unlikely to be a major deterrent as tenants still retain the flexibility to exit after the initial three-year term by not exercising the renewal option, should market conditions turn unfavourable,” she said.
