Sour profits force Singapore's F&B outlets to relocate or shut down

Blame it on rising rents, tighter manpower.

Your favorite after-work hangout bistro may be relocating soon, or worse, it may be closing down forever. With rising operational costs and slimmer manpower supply, the clock is ticking for some F&B establishments in Singapore.

According to Chia Siew Chuin, Director for Research & Advisory at Colliers International, the combination of rising rents and tighter manpower places a major strain on the cash flows of F&B businesses.

“Built to a critical mass, some of these F&B establishments could cease to expand, close down less profitable outlets, strategically consolidate operations and/or leave the industry altogether,” she said. Over the last five years, rents of F&B space have increased by about 10-15% on back of growing demand.

Chia noted that F&B outlets constitute around 30% of a mall’s total net lettable area (NLA). This figure may even spike to almost half of a mall’s NLA.

“This growth has been driven by the increasing affluence and lifestyle trends in Singapore. Mall owners also strategically place F&B outlets so as to attract and retain shopper traffic within shopping centres. This growth phenomenon is not restricted only to malls, as many “off-the-beaten-track” F&B locations have sprouted all over the island such as in Tanjong Pagar, Dempsey Road, Rochester Park and even in public housing areas,” Chia said.

Now it is not unusual that rents for F&B spaces in modern malls range between S$18 and S$25 per sq ft per month. However, in reputed F&B cluster locations, these monthly rents can range from S$13 to S$18 per sq ft per month, said Chia.

But the struggle of some F&B operators to compete in the local market does not end here.

Chia said that “the shortage of labour in the F&B sector, where specialised skilled workers are required, has led to eateries being understaffed. This shortage is due to the Government’s tightened policy on the employment of foreign workers, as well as the reluctance on the part of Singaporeans to pursue a career in the retail sector.”

Echoing these concerns, Gina Kunalan, managing director at The Fat Cat Bistro, said that profits have fallen by about 20% as food and staff costs have gone up. Additionally, the latest hike in alcohol tax had also hit their already souring profits.

“I've tried to raise my prices slightly but there's a limit to this as customers are very price conscious these days. I've also tried to reduce my reliance on staff by using technology like iPads for taking orders so it saves time and allows the staff to be more productive. I've used the government's PIC fund to help offset the cost of this. I've also asked staff to be more mindful about minimising wastage of everything, food, electricity, water, etc.,” said Kunalan.

“Restaurant owners are really struggling to find and retain staff. Even the PRs now are demanding really high salaries as they know we're desperate for staff due to the government's restrictions on foreign workers,” she shared.

After three years of operations at Jalan Riang, The Fat Cat was forced to relocate in September last year. With its new space at Holland Village, the Fat Cat now banks on regular customers from its former location as well as on some new ones who live in the Holland and Bukit Timah areas.

“We've had several changes in staff as usual and it's very time consuming to retrain new staff each time they join us,” added Kunalan.