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A glimpse of the new way forward for grassroots catering development

With high real estate rents, it is a blessing to the public that the price of a two-dish meal can be kept at HK$25-35. This new business model is a way out for restaurant operators nowadays. And in Singapore, the local Coffee Shop or Kopitiam only cost about S$5-6 for a good meal of fish ball noodles or chicken rice with a large drink such as coffee and Milo. The supply and price of food and drink for the general public in Hong Kong is basically free market driven. After the privatization of The Link (formerly known as The Link) in 2004, there is no longer an indirect way for the government to ensure that the grassroots have affordable dining options.

On the other hand, the Singaporean government, still retains this responsibility to care for the needs of the grassroots. To provide affordable food choices, the Singapore HDB (similar to Housing Authority) ensures that there is an adequate supply of canteens in the vicinity of every HDB housing estate in order to maintain healthy price competition.

However, two recent real estate transactions have raised concerns about HDB Kopitiam in the country. In June, a hawker stall at 201 Tampines Street 21 and a hawker stall at 848 Yishun Street 81 were sold for S$41.68 million and S$40 million respectively, breaking the 2015 record of S$31 million for a hawker stall at 155 Bukit Batok 11; the monthly rent for a typical individual stall doubled from S$6,000 to S$12,000, causing many tenants to consider terminating their leases.

The Tampines stall occupies 604 square meters and has 18 stalls that sell classic Singaporean food such as stuffed tofu, chicken rice, kaya toast and half-cooked eggs. However, it is worth noting that these hawker stalls near HDB flats are usually near wet markets with no air-conditioning and average hygiene. However, the transaction price of the hawker stalls in HDB estates translates to S$6,411 per square foot, which is almost the same as the ground level stores in Far East Plaza and Orchard Road Lucky Plaza in the local city center.

There are currently 772 hawker stalls in Singapore, of which 372 are rented out by HDB and 400 are privately owned. In the past four years, HDB has built 34 hawker stalls and plans to build 30 more hawker stalls in the next four years. In order to discourage speculation, HDB has stopped selling stalls since 1998, and the 400 privately owned stalls are the only ones that have been sold in the market since then. All new stalls are now leased by HDB, usually for three years.

In 2018, HDB introduced a price-and-quality approach to attract operators, evaluating potential hawker stall operators not only on their rental bids, but also on the F&B quality and their track record. Under this scoring system, quality accounts for 50% of the evaluation, with the remaining points depending on the ability of the operator to provide affordable food. As a result, the rentals of HDB's hawker stalls have remained stable at the median for the past five years.

Although stall rental is a private contractual agreement between the stall operator and the individual stall holder, to maintain commercial interest, the holder needs to keep the stall rental reasonable in order to retain the operator. If the rental is too high, individual operators may move to other food and beverage establishments, leaving the stalls vacant and increasing the cost to the holder. Therefore, HDB needs to balance the supply of similar stalls in the area with the geographical layout.

HDB adequate facilities for hawker stalls and to strictly regulate the prices and quality of operators, to improve their services and facilities. However, this has increased the competition among hawker stalls, such as Tampines and Yishun, which have five and seven other hawker stalls within a 400-meter radius and have to face stiff competition in addition to the exorbitant stall rentals.

After all, half of the hawker stalls in the market are privately owned. Under the invisible hand of the free market, they will definitely make their own strategies to upgrade their dining environment. Private investors of these Kopitiam properties are also concerned about how to maximize property value through F&B Tech and real estate innovation.


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