Commercial property valuation drops as Spas must close by 10:30pm

Commercial Property valuation drops as Spas must close by 10:30pm. Massage Establishments received a rude shock late February 2018 that their operating hours will be restricted to 10:30pm, in accordance to the revised Massage Establishment Act 2017 (MEA) and will take effect from 1st March 2018. Many of these Spa operators only received the Singapore Police Force Notice letters on 26th, 27th and some even only received it on 28th Feb, few days before the actual implementation. Spa operators are in disarray over the announcement as it leaves them with no time to react to the new rules.

Image Credits: Letter received by Massage Establishment Owner: Key Changes to the Massage Establishments regulatory regime, iCompareLoan.com

Understandably there are some bad eggs amongst the Massage Establishments offering unsavoury services, these are minorities. These bad eggs are believed to be the target of such rules. However if the Police has been active, they would easily find out and know which ones are offering extra services and which ones are decent. Regulars and I mean there are hundred of thousands of regulars, they all know about it, and this includes the men as well as the ladies who frequent spas for wellness, relaxation or healing, they all know the good, bad and ugly. Just close down the bad eggs or ask them to move to Geylang to operate.

Many if not most of these Spa operators affected are your favourite decent massage places that provides very good massages. They provide very good affordable massages and they also suit your working lifestyle and working hours, late into the night.

 

Singapore Restricts 24-hour Spa to within Orchard Road, Marina Centre, Marina Bay, Shenton Way and Collyer Quay. WHY?

In the blanket restriction of Massage Establish operating hours to 10:30pm except in “designated 24-hour massage establishment zones are within and Collyer Quay”. All massage establishments outside of these zones are “Subject to URA’s land use approval and Police’s assessment of impact on law & order.” This is despite licenses already being issued that already approved for such designated use.

What is the purpose of forcing the Spa operators to go to these areas in which to be able to operate 24-hour?

These designated 24-hour zones are very expensive areas, mind you. Any SPAs that eventually set foot in these expensive areas will cost a bomb to ordinary Singaporeans. People with stiff necks, stiff backs from office work will have very restricted hours in which to be able to get a massage and end up in the expensive Marina Area.

Our standard of living and well-being is going to drop and cost of living will increase yet again, along with impending GST rise and many other increases in indirect taxes and land price induced cost of living hikes.

Do bankers and financial people or people within the Financial District deserve good massages and spas more than the regular Singaporeans? 

Are we building too many Grade A retail and offices in Marina Bay that we need to use brute force implementations to bring tenants to these newly created “work, live and play” areas such as in the Marina Bay Area? Are we pushing up commercial property valuation in these designated districts?

A SPA operator (owner) we have spoken to said. “We went to the police to check and clarify the situation.” The police said, “Do not worry, just ignore the letter for now, as a new license will be issued.”

All these are verbal and none was in writing, leaving them in a quandary as to whether to close at 10:30pm or continue to operate as communicated verbally and risk being fined. A first time offender risks a fine of $5,000.

Hundreds of Spa operators with thousands of affected employees are now meeting privately to discuss ways to manage this lightning bolt that came from nowhere. Many are not sure if they should close at 10:30pm as per the letter of if they should listen to the verbal advice. Many jobs hang in the balance.

 

Why Massage Establishments Need Longer operating hours?

Singaporeans work extremely long hours. Queue up in food courts, queue up to take MRT, gets stuck in MRT due to breakdown, etc. There is really very little private time. An average Singapore leaves home at 7:30 or 8:00am from home and leaves work at around 6 to 7pm. Travel home, have dinner and it’s already 8pm. So there is very little personal time. And for those who have children, they have even less time for themselves. When can they possibly relax and recuperate? Possible times for people to take a short break to recuperate: –

• Between 12noon to 2pm. Most people could have a quick 1 hour rest to recuperate.
• Between 7:00 to 8:00pm if they have not yet had dinner. A quick rest before they head out for dinner.
• Between 9:00pm till 02:00am Many people who head back home for dinner at 7:30pm to 8:00pm, they need a short break of 30 minutes before they can get a massage. So they can only do so at 9:00pm onwards. Tourists and shoppers who shop at Bugis, chinatown, little india, Jalan Besar and other non CBD areas till 8:00 or 9:00pm will often need a good massage at 9:00pm onwards after a long day shopping and sight seeing. It is not sure if Boat Quay or Clarke Quay areas are within that 24-hour designated zone. By strict definition, it seems 4 our of 5 areas are in Financial district with one in Orchard Road, the shopping district.

So with the restriction that comes in, the only hours that have some demand are 12noon to 2pm (2 hours), 7:00pm to 8:00pm (1 hour), 9:00pm to 10:30pm (1:30 hours) after the restriction. That is only 4:30 hours of meaningful business operations. The rest of the time, there will be hardly anybody as most people are at work during the weekdays. The weekends of course will be FULL days where the masseuses will work to their death.

Spa operators will need to cover salaries which includes hefty W-Pass levies, S-Pass levies to complement the insufficient numbers of Singaporean employees willing to work in this sector (not too many like this job as it involves hard work and low pay), rental costs, renovation cost, marketing cost and only be able to operate for a productive 4 to 5 hours a day, as opposed to a productive 7 to 8 hours.

Hence cutting all their operating hours to stop at 10:30pm is like punishing the good people for sins some others have committed. Very mid-fifteen century type punishment whereby if they find a witch in a village, they will do a witch hunt. Every woman that carries a broom will be burnt alive and honoured fondly as a witch.  Mind you, this is the 21st century.

If SPA operators are unable to get a case-by-case waiver on the 10:30pm restriction, many good Spa operators will close and go bankrupt. There will be tremendous implications for average Singaporeans.

Designated 24-hour operating Zones also have Brothels

Oh, by the way, Orchard Road also have special services. In a news report by The New Paper, there is a spa in Dhoby Ghaut Spa that almost operates as brothel. So why restrict the operating hours to 10:30pm for those outside the designated zones?

 

Favour the expensive districts of Orchard Road, Marina Centre, Marina Bay, Shenton Way and Collyer Quay and decimate the Commercial Property valuations elsewhere 

Commercial property owners, landlords, you are at the receiving end of this new rule. Your Spa operators will go bankrupt. You will receive either lesser rental if they still survive, or your unit will become vacant. What is worse, this regulation change immediately robs you of millions.

Imagine you were originally able to rent out your shophouse for $15,000 ($180,000/year) and perhaps people will be willing to pay $6,000,000 for your shophouse at 3% yield.

With the new measures, if your rent drops to $10,000/mth or $120,000/year if you are lucky to get it rented out. At 3% yield, your valuation drops to $4,000,000.

Commercial property Landlords, you have just been robbed of $2,000,000 based on this assumption.

Landlords, many spa operators will be unable to pay rent and go into default.  Even if they still have a rental lease, there is no use to force them, they really will not have money to pay you, better to unite and work together.

Health and wellness cost to Average Singaporeans

Many spa operators will close shop if they do not have a case-by-case exception to operate beyond 10:30pm from URA land use planning or the Singapore Police Force. This means that there may not be too many operators able to afford the rents within the expensive designated 24-hour zones if they have not already been bankrupted by this regulatory regime change. There will be acute shortage of massage and spa service providers and a consequent massive price increase.

Just being cheeky here. I wonder which current SPAs are in the best positions to benefit from this calamity. Did they have the foresight to avoid this and benefit from this change by being in the designated zone? Or were they simply super rich and able to pay HUGE rents, and hence the age old adage of Reverse Robin Hood comes true again. Rob the poor and give to the rich. Or maybe the rule where the more expensive the commercial property is, the more expensive it will get. The cheaper it is, the cheaper it will get. Age old rule.

Many Singaporeans who work in desk bound jobs, suffer from acute stress, stiff necks, stiff backs and so on. Not all Singaporeans will be able to afford the  increased prices of massages.

Many of these stress and strain will simply accumulate and get worse leading to major health issues. Many people end up undergoing expensive acupuncture in posh medical clinics providing traditional cures or simply pop more paracetamol, aspirin or worse, end up with acute repetitive strain injury in hospital. This is not even considering the psychological stress a person goes through in the workforce in competitive Singapore, such rest or relaxation to stimulate the lymph nodes, or acu-points for blood circulation once a week or once every 2 weeks will help maintain good sleep.

For the believers, 1 hour of massage per week or 2 to 4 hours a month is necessary to maintain good health.

Singapore has 5.6 million people, if everyone just has 2 hours of massage a month, that would be 11.2 million hours of massages needed per month. And we can never use some silly massage chairs to achieve this (no matter what the advertisement says). It’s not the same.

Tourism, relaxation and nightlife

Nothing beats having a vibrant nightlife and a good and proper massage after a long shopping trip. Hence it does not make sense to only restrict the massage to within the designated zones. There is a lot of demand for these services. Singaporeans are working ever longer hours, services should also be able to extend its hours to provide for the modern day busy Singaporeans.

Extension of Massage Establishment operating hours on a case-by-case basis is via https://licence1.business.gov.sg. Let us all pray for the decent Spa operators.

We are hopeful that the authorities will treat the hours extension benignly so that Singapore can have a vibrant nightlife, and services that caters to the convenience of the average Singaporean who works increasingly long hours, to have a place to heal and relax.

Investing in Commercial Property in Singapore is fraught with risks. Apart from Commercial property loan interest rates, Monetary Authority of Singapore regulatory risks, there is also URA change of planning zones risks and of course the law and order risks.

Seriously, if you are a commercial property landlord, even if you do not rent out to a Spa operator, you may be next in line, maybe they will next restrict food and beverage business in favour of other locations. You are already looking at a loss of easily $500,000 to $2,000,000 in valuation of your property due to this risk. And as if to add salt to your wounds, the Federal Reserve has threatened to increase the interest rate 3 times in 2018 and 2 times in 2019. Singapore’s Sibor will follow suit and your commercial property loan interest cost will soar. Do your part, write to the authorities to voice your concerns.

For those who are reading this, you may consider whether to buy or rent a commercial property.