Restrict investors, not shoebox shops themselves

Chatuchak Market

Chatuchak Market – small shops in tight spaces

I’m beginning to wonder if our National Development Minister is claustrophobic.

After intervening in the private housing market in November last year to restrict the number of shoebox apartments allowed in suburban residential projects, Mr Khaw Boon Wan is now targeting “shoebox shops” in malls. We can only conclude that he just doesn’t like small spaces.

The minister’s beef with residential shoebox apartments was the increasing trend of Singaporeans buying up these units because normal sized private apartments are priced out of the range they could afford. With prices going north of $1,400 psf even in the Outside Central Region (OCR), the only units comfortably below the $1 million mark are 500 sqft shoebox units for those eager to join in the Great National Property Snakes and Ladders Game.

Mr Khaw’s concerns are valid, even if it shows a paternalistic tendency to protect buyers making investment decisions on their own free will. And it’s possible that these investments could yet prove to be shrewd with unabated population increase. Regardless, his intervention was popular with a public who shudder at the thought of shoebox units taking over the country’s housing demography because they ignorantly associate small flats with squalid conditions and housing slums seen in other overcrowded cities.

But to intervene further in “shoebox shops” by restricting their construction is strange. It looks like besides having sweet dreams of old aunties thanking him for keeping HDB prices high, the minister has nightmares as well of shops smaller than car park lots.

As acknowledged by the minister himself in his blog post, these small shops support our entrepreneurs by providing a cheaper alternative to full-fledged shops. They lower the barrier to entry for budding first-time retailers, not unlike the push cart stalls popular with many youngsters getting their first taste of running their own businesses.

If Mr Khaw is worried about individual investors turning to small sized commercial properties as a result of cooling measures placed on residential properties, then the right way to curb this type of speculation is to place similar restrictions through stamp duty, loan-to-value ratios and other tricks they have in their quick fix tool kit.

Similarly, if the concern is on traffic and parking issues, then the authorities can mandate any development plans to sufficiently cater for the estimated volume of cars and people that will visit these premises based on the number of retail units that will be built.

Small shops themselves are not the problem and serve a useful purpose in the retail space catalogue. Whether too many of these units will threaten their own viability is best left to the private market to self-correct.

The most bizarre reason given was that too many shoebox shops affects the shopping experience of customers. I suppose Mr Khaw is not a fan of the popular Chatuchak Weekend Market in Bangkok that welcomes 200,000 visitors a day. It is true that flea markets such as Chatuchak can be overwhelmingly packed and may not be everyone’s cup of tea, but they remain so popular because they are quaint, full of charisma and local flavour, and boast of an incredible variety of goods — qualities sorely lacking in the monotonous replica malls sprouting up all over Singapore.

To those wondering why every shopping centre in Singapore carries an identical range of shops, the truth was revealed by a Savills report last week. Under pressure to maximise returns, mall managers are offering big international brands rental discounts of up to two-thirds lower than the market rate. The World Retail Congress warned that this creates an artificial market that discriminates against small retailers.

So it’s not just Singaporean workers facing unfair hiring practices of foreign PMETs being perceived as better or foreign managers in Singapore hiring their own kind, but local retail businesses are disadvantaged as well over foreign chains. If it’s any comfort, at least we now know that discriminatory practices don’t discriminate between humans and businesses.

This move by Mr Khaw to limit the number of shoebox shops will be a further blow to small local retail businesses on top of the unequal rent treatment they are already facing.