Coffee shops with high price tags reap the profits — while keeping prices low

SINGAPORE — When it was sold for a whopping S$23.8 million in 2013, it sparked fears that such a high transaction price could drive up rents for tenants and lead to higher food prices for consumers.

Two years on, some of the tenants of the coffeeshop on Hougang Avenue 4 — now called Broadway, after the company that owns it — have reported higher rents than before, but fears of costlier food appear unfounded for now, with few patrons interviewed by TODAY saying they feel the pinch.

Coffeeshops changing hands at eye-popping prices made a return to the spotlight last month, when a Bukit Batok coffee shop was sold for S$31 million, beating the record set by the Hougang eatery, and prompting concerns of property speculation over coffeeshops. The issue was raised in Parliament on Tuesday (July 14), when Non-Constituency Member of Parliament Gerald Giam asked if the Government would be mitigating the impact of such high transactions on stall rentals and food prices.

The Broadway coffee shop, located at Block 682 Hougang Avenue 4, has undergone a facelift since the sale. The stalls, some of which are operated by Broadway, offer a variety of dishes ranging from prawn noodles to western cuisine. A bowl of prawn noodles costs S$3.50, while a plate of chargrilled chicken costs S$6.50. The coffeeshop sees steady traffic all day. When TODAY visited at 7pm today, almost every table was occupied and there were lines at some stalls.

Mr Willis Lim, who set up Willis Western Grill at the coffeeshop after the sale, pays about S$11,000 a month for his 200-square feet space, including miscellaneous fees for utilities and cleaning services. Acknowledging that his rent is likely on the high side among the tenants, the 34-year old said he is willing make the investment, because of the coffee shop’s ability to consistently attract large crowds. However, if his rent went up, he would likely move out, as business would not be viable.

Another tenant, who only wanted to be known as Mr Lee, said his rental has increased gradually over the years. The 64-year-old said his monthly rental before the takeover was about S$2,800, excluding miscellaneous fees.

After the change in ownership, his rental increased twice to about S$3,200 last year. Under the new owner, he opened a second stall, and including miscellaneous fees, pays about S$10,000 each month. “If you go to other coffee shops, you pay about the same,” he said in Mandarin. “I’ve no problems surviving.”

Another tenant in his 50s and declined to be named, said his rental doubled two years ago to about S$3,000 a month, including miscellaneous fees. “Rental prices are all about the same. What’s most important is building your customer base,” he said in Mandarin. “If I go somewhere else, I have to start all over again. It’s tiring.” While the increases in rent cut into profits, he said he has only raised prices slightly, as he could not go beyond “market rate”.

Contacted by TODAY on its rentals, Broadway declined to comment.

Some tenants at nearby coffeeshops reported slightly lower rents, but noted their rents have also increased over the years. A helper at Zilan Seafood at Block 684, said the rent is S$8,400 a month including miscellaneous fees, up from about S$7,000 two to three years ago. Mr Teo Soon Hong, 49, owner of Soon Hong Chicken Rice at Block 685, said he is paying S$5,000 a month, compared to S$4,000 about two years ago.

Some of the patrons at Broadway said they have observed slight increases in food prices, but not enough to warrant concern. Mr Raymond Chan, 25, an analyst at Standard Chartered Bank, said the price of the minced meat noodles had gone up from S$3.20 to S$3.50. But he would consider eating elsewhere if prices started to resemble at shopping malls. Mr Chan, who visits the coffee shop at least once a week, added: “I come here for the memories. My primary and secondary schools were in Hougang.”

Full-time national serviceman Justin Wong, 20, said it was normal for food prices to increase from time to time, adding that the food here was still cheaper than those found at some other coffeeshops in Hougang.