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Controlling rent of coffee shop stalls might deter owners from improving: Desmond Lee

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·Senior Reporter
·3 min read
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Diners sitting at round tables eating and drinking in a coffeeshop at Ang Mo Kio St 22. (PHOTO: Chia Han Keong/Yahoo News Singapore)
Controlling rent of coffee shop stalls might reduce incentive for coffee shop owners to invest, said National Development Minister Desmond Lee. (PHOTO: Chia Han Keong/Yahoo News Singapore)

SINGAPORE — Controlling the rent of coffee shop stalls might reduce incentive for coffee shop owners to invest in the improvement of their facilities and services, according to Minister for National Development Desmond Lee.

Lee was responding in written form to a question by Nee Soon Group Representation Constituency Member of Parliament Carrie Tan during Monday’s (4 July) parliament sitting. Tan has asked whether there were any plans to control rents on coffee shop stalls in Housing & Development Board (HDB) estates, so that high rental costs would not be transferred to customers.

Tan’s query comes on the back of Yishun coffee shop KPT Kopitiam being sold for a whopping S$40 million last month, the second sale of its kind in a week. Another coffee shop in Tampines, 21 Street Eating House, exchanged hands for a record S$41.69 million earlier in June, topping a record transaction involving Yong Xing Coffee Shop at Bukit Batok for S$31 million in 2015.

Tenants of the 21 Street Eating House told The Straits Times that rent had increased, spurring some to consider terminating their agreements.

Ensure choices and competition

A key measure to ensure affordable meals and cushion the potential impact of resale transactions was to have a good supply of coffee shops in every HDB estate and town to ensure healthy competition, said Lee. These coffee shops can be run by social enterprises in order to keep food prices low.

“The market for F&B is highly competitive, especially in our heartlands. For example, the two coffee shops at Tampines and Yishun are within neighbourhood centres that have five and seven coffee shops respectively within a 400m radius, and residents hence have a choice of affordable food options there,” Lee said.

There are over 770 HDB coffee shops, and over 100 hawker centres in Singapore. In the past four years, HDB completed 34 new coffee shops, with another 30 expected to be done in the next four years. Four new hawker centres will be operational this year, with another seven in the planning or construction phase.

HDB stopped selling coffee shops in 1998 and has only rented them out since. Lee did not specify how many coffee shops were sold and privately-owned, and how many were rented out.

Provision of budget meals

In 2018, the HDB introduced Price-Quality tenders, with 50 per cent of points assigned to the quality of the operator. The quality takes into consideration the availability of budget meals, good track record and community initiatives. Operators who successfully tender for HDB coffee shops typically provide budget food options at every stall, with these priced at around $3.

The rentals under Price-Quality tenders are also lower and more sustainable than under pure price bidding tenders, Lee added.

In considering rent control measures, Lee cited the need to “guard against unintended impacts”.

“For example, by controlling rent, we could end up reducing the incentive for coffee shop owners to invest in improving their coffee shops to provide better services and facilities to customers,” he said.

“HDB regularly monitors the resale market for HDB coffee shops, as well as the prices of food sold in both sold and rental coffee shops, and will not hesitate to review its policies to address affordability concerns where necessary.”

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