Singapore Small Businesses are Struggling to Survive

Why the Government Must Cap Rents Now: A Retail Sector on the Brink

In 2025, Singapore’s small businesses face an existential crisis driven by relentless rent increases that threaten to erase their presence from the city-state’s vibrant streets. Prime retail rents in the central region have surged by 11.8% since 2022, while suburban rents have climbed by 5.8%, outpacing the revenue growth of many small enterprises. Bakeries like Nicher face a 15% rent hike, pushing monthly costs from $5,000 to unsustainable levels, while Neue Fit gym contends with a 57% increase since 2018, now paying over $20,000 monthly. These figures reflect a broader trend: small businesses, the backbone of Singapore’s cultural and economic diversity, are being priced out, risking a homogenized retail landscape dominated by global chains. The government must act decisively to cap rents and protect these vital enterprises, or Singapore will lose the unique character that defines its neighborhoods.

The stakes are high in a city renowned for its entrepreneurial spirit. Small businesses employ thousands, foster innovation, and create community hubs that attract both locals and tourists. Yet, the unchecked power of landlords, coupled with the government’s reluctance to intervene, threatens to dismantle this ecosystem. The urgency of this issue cannot be overstated—without immediate action, Singapore risks becoming a city of predictable chain stores, devoid of the local flavor that makes it a global destination.

The Rent Crisis Against Small Businesses

The commercial property market in Singapore is heavily skewed in favor of landlords, leaving small businesses vulnerable to exploitative rent hikes. Since the post-pandemic recovery, prime retail rents have risen sharply, with central region malls seeing an 11.8% increase and suburban malls a 5.8% rise between 2022 and 2025. For example, Flor Patisserie in Siglap Drive faces a 57% rent increase, from $5,400 to $8,500, forcing its closure by July 2025. Similarly, at least five shophouse businesses in the same area are shutting down due to comparable hikes. These increases are driven by a tight supply of prime retail spaces and high demand, giving landlords—particularly Real Estate Investment Trusts (REITs) and private strata owners—unprecedented leverage to raise rents without regard for tenant sustainability.

This market dynamic is exacerbated by landlords’ financial pressures. REITs prioritize investor returns, often imposing complex rent structures that include base rent plus a percentage of turnover, which can spike during peak sales periods. Private landlords, facing higher mortgage interest rates, pass these costs onto tenants, with some reporting rent as 30% of their total expenses. The result is a retail environment where small businesses, lacking the economies of scale of global chains, struggle to survive. The government’s failure to address this imbalance risks driving these businesses out, reducing competition and consumer choice.

The Cultural and Economic Cost of Inaction

The impact of rising rents extends far beyond financial statements, threatening the cultural and social fabric of Singapore. Small businesses like Nicher, which offers French pastries, and Neue Fit, a gym supporting national athletes, are more than commercial ventures—they are community anchors. Nicher’s owner, Melvin Koh, faces the prospect of selling his business due to a 15% rent hike, while Neue Fit’s Grace Huang fears closure as her rent consumes a third of her overheads. These closures would not only disrupt livelihoods but also diminish the unique experiences that define Singapore’s neighborhoods. In 2024, 85% of renters surveyed expressed frustration with high rental prices, reflecting widespread public concern about the loss of local businesses.

The economic consequences are equally dire. Small businesses contribute significantly to Singapore’s GDP, with the retail and food and beverage sectors employing over 300,000 workers in 2024. Their displacement by chains risks reducing innovation, as small enterprises often pioneer new concepts that larger firms adopt. Moreover, rising rents contribute to inflationary pressures, with business cost increases passed onto consumers, driving up prices. The government’s inaction risks creating a retail landscape dominated by predictable, homogenized brands, undermining Singapore’s reputation as a dynamic global hub.

Why Rent Caps Are the Solution

Mandatory rent caps are the most effective way to protect small businesses from crippling rent increases. By tying rent adjustments to inflation rates—projected at 2-3% for 2025—or business revenue growth, the government can ensure that hikes remain manageable. For instance, a cap limiting annual increases to 5% could have saved businesses like Flor Patisserie, which faced a 57% jump. In 2023, a bar owner in central Singapore reported rent consuming 30% of expenses, a burden that could be alleviated by caps. Such a policy would provide predictability, allowing small businesses to plan for growth rather than survival.

Critics argue that rent caps distort the market, potentially discouraging property investment or reducing retail space quality. However, these concerns are overstated. Means-tested caps, applied only to small businesses with revenues below a certain threshold, would minimize distortions while protecting vulnerable enterprises. Additionally, tying caps to inflation or performance metrics ensures fairness for landlords, who can still achieve reasonable returns. Cities like New York have implemented similar measures with success, preserving small businesses without collapsing the property market. Singapore, with its tightly regulated economy, is well-positioned to adopt this approach.

Strengthening Leasing Regulations

Beyond rent caps, the government must strengthen leasing regulations to promote fairness. The voluntary Code of Conduct for Leasing of Retail Premises, introduced in February 2024, has proven ineffective, as many landlords opt out. Making this code mandatory would ensure transparent lease terms, prohibiting exploitative practices like percentage-based rents that penalize success. For example, a retailer in Orchard Road faced yearly rent increases despite an 8% sales decline since 2015, highlighting the need for regulation. A mandatory code could require landlords to justify rent hikes based on market conditions or tenant performance, leveling the playing field.

Transparency is critical. Many small businesses sign leases with hidden costs or unclear escalation clauses, leaving them vulnerable to unexpected hikes. A mandatory code could mandate clear disclosure of all terms, including base rent, turnover percentages, and renewal conditions. This would empower business owners to negotiate from a position of strength, fostering a more equitable rental market. By enforcing such regulations, the government can protect small businesses without undermining the broader property sector.

Financial Support to Bridge the Gap

Direct financial support is another critical tool to help small businesses weather the rent crisis. Rental relief grants, targeted at sectors like food and beverage, retail, and wellness, could alleviate the burden of high rents. For instance, Neue Fit, which pays over $20,000 monthly, could benefit from a grant covering 20% of its rent, allowing it to invest in programs and staff. In 2024, warehouse rents rose by 2% quarter-on-quarter despite declining occupancy, underscoring the need for targeted aid to counter market imbalances. A means-tested grant program would ensure that only struggling businesses receive support, minimizing waste.

Tax incentives for landlords who offer affordable leases are equally important. By reducing tax liabilities for landlords who cap rent increases at 5% annually, the government could encourage fair practices. In 2023, similar incentives in other cities helped preserve affordable commercial spaces, proving their efficacy. These measures would not only save businesses but also reinforce Singapore’s reputation as a supportive environment for entrepreneurship, attracting more small enterprises to its shores.

Managing Commercial Space Supply

Strategic management of commercial space supply is essential to stabilize rents. In 2025, warehouse occupancy is projected to fall to 91.1% due to increased supply, suggesting that deliberate supply interventions can influence rents. The government could mandate that 20% of new commercial developments be reserved for small businesses at subsidized rates. Alternatively, incentives for developers to include affordable retail spaces could ensure a steady supply of accessible locations. This approach would prevent market saturation, which drives up rents, and support small businesses in prime areas.

Historical data supports this strategy. During the pandemic, prime retail rents fell by 20.2% in central regions and 8.7% in suburban areas due to reduced demand. By proactively managing supply, the government can create a balanced market that supports both landlords and tenants. Zoning regulations could prioritize small businesses in cultural or entrepreneurial hubs like Siglap Drive, preserving their unique character and ensuring long-term economic vitality.

The Risks of Inaction

The government’s reluctance to act risks catastrophic consequences. Without intervention, small businesses will continue to close, with ripple effects across the economy. In 2024, the retail sector saw a 3% decline in small business openings compared to 2023, reflecting the chilling effect of high rents. The loss of these businesses reduces employment, with small enterprises accounting for 70% of retail jobs in Singapore. It also stifles innovation, as small businesses are often the testing ground for new ideas that larger firms adopt.

Moreover, the public is increasingly vocal about the crisis. An X post in May 2025 called a 57% rent hike for Flor Patisserie “plain greed,” echoing widespread frustration. If the government fails to act, it risks alienating both business owners and consumers, who value the diversity and vibrancy of local enterprises. The alternative—a retail landscape dominated by chains—would diminish Singapore’s global appeal, turning it into a less distinctive destination.

A Call to Preserve Singapore’s Soul

Singapore stands at a crossroads. The unchecked rise in commercial rents threatens to dismantle the small business sector, eroding the city-state’s cultural and economic vibrancy. Mandatory rent caps, strengthened leasing regulations, financial support, and strategic supply management are not just options but necessities to save these enterprises. The government must act decisively to protect the bakeries, gyms, and shops that define Singapore’s neighborhoods, ensuring they remain hubs of innovation and community.

Looking forward, Singapore has the opportunity to set a global standard for supporting small businesses. By implementing these measures, the government can foster a balanced market that benefits landlords, tenants, and consumers alike. The alternative—inaction—risks a future where Singapore’s streets lose their soul, replaced by the sterile uniformity of global chains. The time to cap rents and save small businesses is now, before the city-state’s entrepreneurial spirit is lost forever.

Shaun

Founder

With over a decade of expertise spanning investment advisory, investment banking analysis, oil trading, and financial advisory roles, RealisedGains is committed to empowering retail investors to achieve lasting financial well-being. By delivering meticulously curated investment insights and educational programs, RealisedGains equips individuals with the knowledge and tools to make sophisticated, informed financial decisions.

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Shaun

Co-Founder