SINGAPORE – Until recently, civil servant Norman Lopez did not think much of what he pays when patronising the KPT Kopitiam at Block 848, Yishun Street 81 twice a day for his coffee fix.
But that changed when food and beverage giant Chang Cheng Group forked out $40 million in June for the coffee shop, a transaction that followed two other recent high-price coffee shop sales.
In April, 21 Street Eating House in Block 201, Tampines Street 21 changed hands for a record $41.68 million.
It was bought by a company named G&G, which also paid $16.8 million for a coffee shop in Block 201D, Tampines Street 21.
Mr Lopez, 53, said the headline-grabbing figures now have him worried.
“Right now, the teh-o (tea without milk) is priced at around $1.20, which is the same as other places in the area.
“If it increases to $1.50, I’m not too affected, but if it increases to $2, I’ll stay at home and switch to three-in-one drinks instead,” said Mr Lopez, who lives a five-minute walk away at Block 853.
He pointed to the Sheng Shiong supermarket, located just steps away from KPT Kopitiam, and said he will buy his three-in-one mix from there if prices at the coffee shop are raised.
With core inflation hitting a 13-year high last month amid the rising costs of food, Yishun resident Pang Wang Cheng said he has to watch his spending closely.
The 48-year-old chef has breakfast at the 24-hour KPT Kopitiam every day and currently pays $4 for bee hoon.
If the price increases to $5, he said he will cut back on meals there.
“I cannot be walking 1km to 2km to another coffee shop just to save 50 cents or $1,” added Mr Pang, who said the other eateries in the neighbourhood are not as conveniently located.
Their concerns over price hikes stem from worries that the new owners will charge more for rent, a worry the tenants share.
Several stallholders at 21 Street Eating House have complained about rental hikes that they say is ill-timed because people are planning to cut back on dining out.
In an earlier interview, the owner of Kumamoto Ramen, who wanted to be known only as Ms Jacquelyn, said she has been making a loss since the rent she pays was raised from about $5,000 to nearly $10,000.
She had to let two workers go since April when G&G took over, leaving one worker to man the stall. But now she is thinking of shuttering.
Property analyst Ethan Hsu, who is head of retail at real estate consultancy Knight Frank, said: “It is reasonable to assume that coffee shop owners will want to increase rents over a period of time to improve their profitability.”
But he added that they will have to do this carefully to avoid losing their good stallholders that pull in the crowds.
Mr Hsu said there are advantages to partnering with a strong coffee shop operator – they can bring in other tenants to form a good mix of food offerings within the coffee shop.
They can also leverage the operator’s network if it has multiple outlets.
“This can help to scale up their business faster and more efficiently especially if the outlets are well spread out across the island,” said Mr Hsu.
G&G is not new to the coffee shop business. It is linked to the 7 Stars coffee shop chain and U Stars supermarkets, according to Accounting and Corporate Regulatory Authority records.
There are other big operators, such as the Chang Cheng Group, Kim San Leng, Ba Da Ling and Kimly group.
They belong to the Foochow Coffee Restaurant and Bar Merchants Association, whose members cumulatively run about 400 coffee shops.
Mr Hong Poh Hin, the association’s vice-chairman, said high-price sales of coffee shops are rare.
Instead bigger groups may acquire several coffee shops by renting from smaller operators.
While such high-price transactions are attention grabbing, National Development Minister Desmond Lee said in a parliamentary reply last week that they are a minority – 70 per cent of resale transactions of coffee shops sold since 2010 were below $10 million.
The volume was also low, with an average of 15 transactions yearly since 2010.
Mr Lee said that in the 1990s, the Housing Board sold about 400 coffee shops located in HDB blocks to encourage private-sector ownership in running these coffee shops.
It stopped selling them in 1998.
Mr Alan Cheong, executive director of research and consultancy at property consultancy Savills, said it is those in mature estates with high footfall that are now attracting investors.
But with 1,110 licensed coffee shops, including over 770 located in HDB blocks, any price hike will see customers decide with their feet.
Mr Lee said as much, describing the food and beverage market in the heartland as competitive.
He added that there are usually other eateries within close proximity to coffee shops, including the ones that made the news in Tampines and Yishun, giving residents choices for affordable food.
A coffee shop at Block 496, Jurong West Street 41 also recently changed hands for an eight-figure sum, reported local media outlet 8world.
The owners of the coffee shop, now called Food Hub, did raise rent slightly.
Tenants said they could absorb the higher costs, adding that they are counting on high turnover to remain profitable.
Retiree Lim Khim Peow, 86, said he is spoilt for choice in Tampines, where he lives.
While he is concerned about price hikes, he said he is focusing on convenience and will continue to drop by 21 Street Eating House for meals.
Said Mr Lim: “It’s still cheaper than taking a bus to get coffee at a lower price.”
Recent coffee shop transactions
1. Saffrons @ 201D
Price transacted: $16.8 million for 358 sq m total or $4,360 psf
Where: Block 201D Tampines Street 21
When: Purchase completed in May
Who: Bought over by G&G, whose owner runs the U Star supermarket chain
2. KPT Kopitiam
Price transacted: $40 million for 397 sq m total or $9,361 psf
Where: Block 848 Yishun Street 81
When: Transaction made in June
Who: Chang Cheng Group
3. Yong Xing Coffee Shop
Price transacted: $31 million for about 452 sq m total or $6,856 psf
Where: Block 155 Bukit Batok Street 11
When: Purchase finalised in May 2015
Who: Bought by EH 155, whose director is Mr Kok Kuan Pow
4. Coffee Express 2000
Price transacted: $23.8 million for about 402 sq m total or $5,935 psf
Where: Block 682 Hougang Avenue 4
When: Transaction made in March 2013
Who: The Broadway Group, which owns 22 eating establishments across various parts of Singapore
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