SINGAPORE - The hefty wage bill is now unavoidable.
And the surging industrial property market has made it a perfect storm of high operational costs for industrialists here, market watchers say.
Prices for industrial property have risen 27 per cent in the first nine months of the year, latest data from the Urban Redevelopment Authority showed, as investors seek alternatives to residential properties.
And rents, while not quite keeping pace, have still gained a significant 6 per cent in the same period.
Rental costs were highlighted as one of the three most important factors of business costs, along with labour and energy expenses, in a study by Leong Kaiwen, assistant professor of economics at Nanyang Technological University.
"This is a fundamental problem, this will be a huge problem for our companies . . . because just imagine if I stay in Singapore, instead of upgrading my products, I have to spend so much on rental, I become much less competitive than my competitors out there," he said, referring to neighbouring countries, such as Malaysia and Indonesia, where operating costs are lower.
His research, presented at the Singapore Business Federation Small and Medium Enterprise Convention, also showed that profits for 66 per cent of the 90 respondents surveyed had fallen "significantly" between 2008 and 2011.
This figure shot up to 80 per cent when limited to manufacturing, wholesale and retail trade, and transportation companies.
With the economy slowing and labour costs expected to go up further, the squeeze on companies could worsen.
Eric Tan, CEO of real estate consulting firm GSK Global, said the current rates of increase will add another 3 to 5 per cent to existing business costs.