HDB Rents: The Hidden Risk Squeezing S'pore Businesses

A stark divergence is cleaving Singapore’s commercial property landscape, creating a tale of two markets for the nation's heartland entrepreneurs. While rents for HDB shops leased directly from the government have seen modest and steady increases, those held by private landlords have skyrocketed, doubling in the past year alone. Median rentals for these privately-held shops surged from $3.51 per square foot (psf) in the second quarter of 2024 to an unprecedented $7.34 psf in the same period of 2025, squeezing tenants and reshaping the face of local commerce. This rental surge arrives amidst a complex economic backdrop where businesses are already navigating persistent cost pressures and a cautious consumer outlook, forcing a painful re-evaluation of viability for many small enterprises.

The bifurcation in the HDB commercial rental market stems from a policy decision made in 1998, when the government ceased the sale of HDB shop units to private owners. This created a finite pool of approximately 8,500 privately-held shops, while the remaining 7,000-plus units are now leased directly by the HDB. This distinction is now the central factor driving the current rental disparity. Shops rented from HDB have seen largely stable rents over the last five years, with average increases for essential services like minimarts at a mere 4% between 2020 and 2024.

In response to this intense rental pressure, business owners are engaging in strategic retreats and creative compromises to stay afloat. The most common tactic is the optimisation of space through subletting. Entrepreneurs are carving out portions of their rented shops to lease to smaller, often complementary, businesses. This creates a secondary income stream that directly offsets the primary rental burden, allowing businesses like bakeries to coexist with hair salons or bubble tea stalls in a single unit, albeit at the cost of their own operational space.

The acute pressures in the commercial space mirror trends seen across Singapore's broader property market, affecting both personal and business finance. In the residential sector, HDB resale prices are forecast to see a moderated but still firm increase of 3% to 6% in 2025, driven by a significant supply crunch. The number of flats reaching their Minimum Occupation Period is projected to hit a ten-year low in 2025, constraining the available supply for both resale and rental markets. This sustained demand keeps prices buoyant, making homeownership a significant financial commitment.

This environment of rising property costs is unfolding within a wider context of economic caution. While Singapore's retail sector saw a 1.4% year-on-year increase in May 2025, this was largely driven by motor vehicle sales, and underlying momentum appears weak. Analysts anticipate a softening in the retail landscape in the second half of 2025, citing an expected economic slowdown, weakening labor market conditions, and sluggish tourist arrivals.

The dual-market reality of HDB commercial rentals presents both a challenge and an opportunity for shaping the future of Singapore's heartland communities. The stability of HDB-controlled rents provides a crucial buffer for many essential services, ensuring that residents continue to have access to affordable goods and services. However, the volatility in the private market threatens the diversity and vibrancy of these neighbourhood hubs, risking the displacement of long-standing, beloved businesses by those with deeper pockets.