Singapore's mall vacancies rise and consumers too are tight-fisted

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By: Frank Doe

Bloomberg reported today that Singapore’s mall vacancies rose to the highest level in a decade in the third quarter as an oversupply of shop spaces added to muted spending by shoppers. Yes, it is painfully apparent that more and more empty shop spaces are showing up at our once vibrant shopping complexes.

Consumers too are tight-fisted these days for the following reasons:

  1. The gloomy economic outlook which is expected to be prolonged.
  2. Companies and industries are shedding jobs like never before.
  3. Family disposable income shrank because of astronomical housing prices and private transport. This siphoned off a huge chunk of their income.
  4. Household debts on the rapid rise, highest in Asia.
  5. It’s much cheaper to buy online. Operators have low inventory carrying costs and pay little for brick and mortar costs, less warehousing costs, no need shop spaces and showrooms.
  6. The 40% foreign manpower earns here but they don’t spend here. Easily 70% of their income repatriated home. A GDP leakage and a tremendous loss of the economic multiplier.

Most malls are owned by Temasek Holdings and Real Estate Investment Trusts, and rentals are exorbitant. A rent seeking economy is a passive economy, the landlords (the government being the largest) simply secure a hefty return on land and receive payments by virtue of ownership.

They contribute little to the creation of wealth but they seize a huge chunk of wealth that they played little in creating. To the economists, the is “unearned income” and they are essentially destroying the incentive to create wealth.

Nobel laureate Joseph Stiglitz, in his essay titled “Standard Economics Is Wrong. Inequality And Unearned Income Kills The Economy” said:

“The trickle-down notion— along with its theoretical justification, marginal productivity theory— needs urgent rethinking. That theory attempts both to explain inequality— why it occurs— and to justify it— why it would be beneficial for the economy as a whole. This essay looks critically at both claims. It argues in favour of alternative explanations of inequality, with particular reference to the theory of rent-seeking and to the influence of institutional and political factors, which have shaped labour markets and patterns of remuneration. And it shows that, far from being either necessary or good for economic growth, excessive inequality tends to lead to weaker economic performance. In light of this, it argues for a range of policies that would increase both equity and economic well-being.”

Stiglitz warns that the rise in the share of rents has happened at the expense of wages.