Rising land prices squeeze heartland coffee shops, pushing prices up for consumers

SINGAPORE: Behind the scenes of increasingly high food prices at heartland coffee shops lies a lesser-known culprit: soaring land prices. As the value of land continues its upward trajectory, a ripple effect is reverberating through the food supply chain, ultimately leading to higher prices for consumers.

OrangeTee Advisory Pte Ltd (OrangeTee Advisory), recently announced that an HDB coffee shop at Block 110 Yishun Ring Road is up for sale by expression of interest (EOI) at a guide price of S$11 million. The EOI exercise closes on Wednesday, May 29, 2024 at 3:00pm. With this amount in mind, a coffee shop owner needs to pay around S$15,278 monthly, without bank interest.

Dollars and Sense reported in 2022 that food prices rose 58.9% compared to 20 years ago, highlighting the relentless upward trend.

Read also: Food price increase: Even middle-class people can’t afford to dine out anymore

In addition, according to the latest data by the Singapore Department of Statistics the prices of cooked hawker food rose over 6% last year, the highest since 2008. The report also found that food in coffee shops and food courts are higher compared to hawker centres.

In a report from Channel News Asia in January 2024, Mr Khoo Keat Hwee, a coffee shop owner renting in the prime location of Clementi outlet, shared that the rent had increased by 20 to 30% since he started his coffee shop two years ago.

Although he did not reveal the exact amount for the rent he was paying, he noted that the price can go up to S$9,000. 

He shared, “The stalls we closed were doing fine in terms of customers but with the rent increase, it won’t be sustainable as we would have to increase the price and lose customers in the process.”

He also noted that besides rent, other expenses are rising. These include employee wages, supplies, utilities, and ingredients.

This highlights why many coffee shops in the heartlands are closing. Rising rent forces owners to pass on costs to customers and cut corners elsewhere. However, even with these measures, their overheads remain high.

This also means customers will face higher prices when purchasing food and beverages.

According to The Straits Times, “There are currently 776 coffee shops, fewer than half of which are owned by HDB. The remaining 402 are privately owned.”

While Singaporeans may constantly notice food prices skyrocketing, business owners experience the same with their expenses. As Mr Khoo Keat Hwee said, “My rental is (considered) normal, but this normal is really high cost.” /TISG

Read also: Eatery menu shows food prices up by 20%, even 25% — S’porean says it’s the “real world effect of 1% GST”

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