The prominent shopping centres owned by Real Estate Investment Trusts (REITs) may deserve higher rents, but with the proliferation of REITs over the past decade, their retail rents crept up first to test what the market would bear.

The Economic Survey of Singapore could not find obvious evidence of rental hikes due to REITs because single-owner malls jumped on the bandwagon to enjoy higher returns. (“REITs have no effect on malls’ rents: Study”; May 21).

What worries me most is that rental and labour costs account for 68 per cent of business costs for small and medium enterprises (SMEs) in retail, as reported last year by the Ministry of Trade and Industry.

In a free-market society, SMEs compete for space and location to do business.

However, during our economic restructuring now, the Government, conglomerates and REITs should refrain from any profit maximisation approach at the expense of SMEs.

It is not possible, for example, to transform traditional, low-cost eateries with quality cuisine into expensive, fine-dining outfits overnight through high rents.

In Hong Kong, the 42-year-old Lei Yuen Congee Noodles closed after its landlord wanted to double the rent to HK$600,000 a month (S$97,010).

In Singapore, a rental increase from S$8,000 to S$12,000 a month forced Hong Kong Jin Tian Eating House in Tiong Bahru to close down.

There is no reason for shop operators to work hard for the benefit of property owners.

Other good food outlets have closed due to such rental increases, while the impending closure of popular Lavender Food Square may be a precursor to other hawker centres making way for REITs.

Some aggressive REITs might demand double the rent to renew a lease, without any compassion for the business owner, while other shopping centres follow with 30 to 50 per cent increases.

How do SMEs double their profits to meet such demands when they must cope with cost increases in labour and other services?