This is a continuation of Part 1: Response to “Property consultants point to snag in fair tenancy framework recommendations”.
I want to allay Ms. Christine Li’s concern that the fair tenancy framework recommendations may not allow landlords to respond swiftly to structural changes such as the rise of e-commerce. The FTFIC’s recommendations are designed precisely to make sure property managers, in her words, keep pace with the changes.
Amazon, the company often credited or blamed (depending on how you see it) for the brick-and-mortar retail apocalypse, is 25 years old. E-commerce has risen, rise, rose, rosed-ed. While the F&B sector in Singapore has quickly adapted to food deliveries, buy-online-pick-up-in-store, what has the landlord done? They have quickly charged turnover rent on the online sales of food prepared in their shop premises.
There are four guiding principles of the FTFIC’s recommendations. The first one is incentivising value creation. Charging turnover rent on tenants’ online sales (in addition to fixed rent) that are not generated by the property is precisely the kind of predatory rent-seeking behaviour we are trying to discourage. Instead the property managers’ attention and efforts should be directed and rewarded for creating value in the face of such headwinds.
What does create value?
I don’t know. I bet it involves a lot of trial and error. Like how F&B took risks and figured out how to execute food deliveries and buy-online-pick-up-in-store. I sincerely wish their rewards correspond with the risks they took.
In the US, as stores begin to reopen after the lockdown, curb-side pickup and store fulfilment are becoming more widespread. As retailers, we know for a fact that it’s a lot more profitable for us if customers pick up their purchases rather than us offering free delivery to send them their purchases.
Have property managers perhaps thought of constructing something that’s the equivalent of a curb-side? It’s probably like a drop-off point that most properties already have. Other than a loading bay for trucks, is there a parking facility for Grab/Deliveroo drivers to come in and out of the property faster and cheaper? Could the property manager create a locker system in a designated area for all their tenants to use? The tenants’ customers may then use the locker system to pick up their purchases without even stepping into the shop, hence freeing the sales associate to serve other customers.
I don’t know what works. But I do know that just taking more rents from us without doing shit doesn’t work.