Recently, AsiaOne reported that there were no takers at a Changi Village coffeeshop even though the owner was not charging any rent.
While Changi Village was never the most popular destination for Singaporeans, it has been a magnet for several groups of Singaporeans. Namely, those who served their National Service in various camps in the vicinity, older Singaporeans who used to live and work in the area mainly serving a nearby British military base, as well as those who prefer its less crowded beaches.
Since the 4th quarter of 2022, extensive road closures in Pasir Ris has crippled the state of business activity in Changi Village. These closures, mainly due to construction works for the Cross-island Line (CRL), are expected to affect access to the neighbourhood until 2028 to 2029.
Here are some things we can learn from the collapse of businesses nestled in one corner of Singapore.
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#1 Businesses In Changi Village May Not Even Enjoy The Full Upside, After Suffering Most From The Disruption
The construction works disrupting access to Changi Village will last about 6 to 7 years in total – from 2nd quarter 2022 to between 2nd quarter 2028 and 2029.
This is a long time for businesses to ride out a storm. It is more likely that the business will cease, and perhaps relook opportunities after the construction works are completed.
For landlords, they may have to ride out the storm and perhaps offer attractive rents. Again, this may be impossible given that the coffeeshop owner cannot even attract food vendors even without any rental charge.
Perhaps the worst part about weathering the 6 to 7 years of disruption is that businesses in Changi Village will be far from the biggest beneficiaries of the construction work. The Cross-island Line (CRL) station will be in Loyang – benefitted businesses near the Loyang Industrial Estate and perhaps some residents in Pasir Ris most.
The biggest win for businesses in Changi Village would simply be the resumption of normal road access, since the MRT line itself will not be reaching near the neighbourhood.
Read Also: Which Housing Estates Will Benefit The Most From The Cross Island Line (CRL)?
#2 Businesses Affected By Isolated Disruptions Cannot Expect Government To Intervene
If there is widespread disruption to all businesses, the government has also shown the propensity to provide support. This was during the recent COVID-19 pandemic, when the government provided financial support for affected businesses.
In isolated cases like this, the government may acquire plots of land that are directed impacted by its construction works. At least this will give landlords and businesses some “closure” for their business disruption.
In other cases, businesses may be affected, but perhaps also stand to benefit the most when the construction project is completed – which we have argued may not be the case for Changi Village businesses.
This simply tells us that businesses must make the best decisions for themselves, including downsizing or closing down, and cannot wait around for hand-outs.
Read Also: Guide To Closing Down A Company In Singapore: Striking Off Company & Winding Up
#3 There’s No Such Thing As Cheap Rent (Or Expensive Rent)
The rent that businesses pay for their premises cannot be determined as cheap or expensive simply based on the nominal price.
As we can see from the AsiaOne article (linked above), even not paying any rent can be very expensive. This is because there will be fixed costs that come with running a business, including manpower, equipment, raw material, utilities, logistics and others.
Moreover, spending time in one location may mean that the business cannot spend time in another location.
In the article, it also goes on to say that many hawker centre stalls (in the nearby Block 3 Changi Village Road hawker centre) are also empty today. The hawkers prefer to forfeit their rent than spend on the fixed cost and time at the location.
An article we wrote previously found that the median price of a stall at the hawker centre was going at slightly above $550 a month.
This same Changi Village hawker centre also had to close for about 3 months for upgrading works in August 2022. Those who thought these upgrading works would improve business or renewed their lease because of these upgrading works would likely not have seen any uptick in their takings.
Whether a rent is cheap or expensive for a business is more a function of whether the business can earn a profit from renting the location.
Read Also: [2024 Edition] Price Guide For Cooked Food Hawker Stall Rentals In Singapore
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