By Mindy Tan

SINGAPORE - Rising rentals for commercial and industrial space have emerged as a pressing issue for small and medium enterprises (SMEs), and the fingers are pointed squarely at the dominance of real estate investment trusts or Reits as landlords.

The Reits' drive to enhance yields and returns for unit holders - which usually translates into rental hikes - have left many SME owners, who feel they have limited alternatives here, fuming.

It has also led to calls - including a recommendation by the newly formed SME Committee - for JTC Corp to review its current policy of divesting industrial space to private entities like Reits and return to its previous role of an industrial landlord, so that it can provide ready and affordable industrial space to SMEs.

'Rentals and capital values of properties are going up, impacting business costs for SME owners and eating into their bottomline,' said Lawrence Leow, chairman of the SME Committee.

According to Abdul Rohim Sarip, president of the Singapore Malay Chamber of Commerce & Industry (SMCCI), rental forms between 40 per cent and 50 per cent of operational costs for small businesses. So the increase in rental costs has had a significant impact on their bottom-line.

'About 40 per cent of these companies (from the retail and manufacturing industries) who seek advisory assistance from EDC@SMCCI have difficulty in sustaining their operational costs and are in need of short-term loans from banks, which is another challenge,' he added.

Noted Low Cheong Kee, managing-director of Home-Fix DIY: 'Reits are commercial entities. They will do what they can to keep upping the rent at every renewal whereas JTC had a national agenda to stabilise rent.'

JTC, a statutory board, oversees the development of industrial infrastructure in Singapore. There is clearly frustration among SME owners. An SME owner who did not wish to be named told BT she is currently in negotiations with her landlord, a Reit trust manager, to renew her lease for an additional three years. The new lease agreement is for $28,000 per month, plus 3 per cent of the store's monthly gross turnover (GTO). She currently pays $17,000 for her 1,000 sq ft unit.