_Making sense of the $52,000 rental bid for Tampines clinic
Presenter:
Last week, there was a bit of a hullabaloo over rental over health care costs. This is about the news regarding that $52,000 monthly rental bid for a GP clinic in Tampines. This was a bid for the ground floor unit at block 954C, Tampines Street 96. That bid was successful, by the way, and that's why it raised eyebrows, sparked conversations about rental fees and health care costs. Even Health Minister Ong Ye Kung himself expressed dismay at the bid.
So HDB says the rental for this Tampines clinic does not set any price requirements for future tenders by HDB, and it will also not affect the rentals that HDB is charging other existing clinics. The co-owner of Eye Health Medical Goldings, the healthcare company who won the bid, says they're not trying to squeeze patients and has explained their business model.
Ethan, thank you for joining us on the morning report this morning. So we want to start with, how did you react to this piece of news when you heard about the successful bid of $52,000?
Ethan Hsu:
This is definitely the talk of a town for the past week or so. I think when I first heard of it, the first thing that came to mind was that this is, this is not the norm, definitely, for sure, something that's a little bit, you know, an outlier in terms of the kind of market rents that we've been seeing well. But at the same time, the HDB adopts this whenever they have a commercial space to let up. It's always conducted via a public tender exercise, which means that it allows interested parties to submit their tender price a bit on a free market basis, so each interested party would do their own calculations.
They submit their own proposals based on what they have crunched numbers with internal stakeholders. They decide on a certain model that they want to present. They want to create a certain concept, for example. They calculate a number of rooms that they can have, a number of consultation rooms that they can have within the clinic. And then they submit a bit based on their best estimates, right? And based on that, because it was a price tender, I mean, we call it a price tender because which means that the evaluation criteria when HDB looks at the submissions would be purely based on price, of course assuming that all other qualifying criteria are met. Yeah? So for in this case, yes, the highest tender tendered price, the 52,000 bid, came from this particular party, and it was awarded this way, yeah? So usually, that's how it works for HDB tenders. It's pretty much straightforward,
Presenter:
So it’s pretty transparent, that's what you're trying to say, right? I'm just trying to get into the psyche of us reacting to this piece of news. What was shocking about it was it the fact that, you know, we're paying a $52,000 monthly rental for an HDB space, rather than what you can find in the city centre perhaps?
Ethan Hsu:
I think the shocking part is it’s an HDB shop lot and people usually have the perception that with HDB being a public sector landlord, and in line with the ongoing conversations about how rentals are rising, people expect public spaces to be more reasonably priced. But because of the open tender system, it's actually left to open market forces to dictate what the eventual price would be. It's a public sector landlord, a public space that's available to everyone, to actually, you know, have access to.
The more important thing is because the particular trade that it was meant for was for a GP clinic, meant to serve the needs of the residents to get access to quality health care in HDB estate. And I think what's from that angle that a lot of people felt that if at that kind of price that's being put in eventually, people, the people who would have to bear the brunt of it would be the customers, right? If this is going to raise the cost of healthcare for ordinary Singaporeans, I think that's where I think people tend to react a lot more whenever the trade is in line with public interest like supermarkets, coffee shops, clinics, childcare centers. I think that's a fair statement to make.
Presenter:
Based on your experience in this line of work, Ethan, have you come across similar rental bits that it raised eyebrows? I mean, not necessarily for clinics.
Ethan Hsu:
I think there's certain traits that will be more bullish in terms of rents. If that particular shop was tended out for a bank, for example… banks being in financial institutions have a different pricing model. Or, you know, maybe the aesthetic clinic, for example, had taken that space because they do beauty treatments. And some of these could have a different business model that they pursue, with a different occupancy cost threshold, it is the amount of rent they pay for every dollar that they make from that place.
Presenter:
How much is the typical rent for commercial spaces at HDB blocks? If $52,000 is deemed too expensive?
Ethan Hsu:
I think it depends on the location and also the kind of size that they are that's being tended out for. Obviously, a bigger space would be able to offer more services, and then, because of that, they can achieve a higher monthly revenue. And because of that, maybe the bids would be much higher. So it's very difficult to say, on average, what are we seeing in the public space or the private space. Because I think what a lot of people don't realize is that a specific shop lot can attract a different rental from getting a different trade to come in to operate. A particular landlord can offer this shop lot at X dollars for a specific trade, but they can also ask for more if it's like to another trade, for example, if it's selling like jewelry, luxury watches, for example, which typically have a higher like occupancy cost matrix.
Presenter:
How much more would the rent be, in a more central location?
Ethan Hsu:
Again, it goes back to depending on what kind of trade this concept is meant for. They have a certain target catchment that they want to attract.
If the mall is able to attract the kind of crowd that they are going for, the particular trade is going for, then they might be willing to pay a higher rental for that. But at the same time, a GP trade, for example, doesn't necessarily have to be in the central area, right? They want to be nearer where people live so they tend to not mind paying more actually, if they are able to get to the kind of catchment that they are targeting. In fact, I think during the COVID pandemic, we saw a lot more people, bidding higher rents for suburban areas compared to pre COVID areas, where central areas actually typically attracted higher rent.
Presenter:
We hear of hawker stalls in the heartlands going for $10,000 a month in rent. I mean, that's another issue altogether, and it just speaks of the rising costs here in Singapore, to be sure. What are some considerations for tenderers when they submit a bid for a unit? You alluded to some of the factors earlier, things like what their business model is going to be like that, their audience capture as well. But what else on the practical side, on the other practical side of things, do they consider when it comes to bidding for rent, essentially?
Ethan Hsu:
HDB tenders will release this sort of information available for the public to view, either on the website or through the marketing agents that HDB engages. They have a panel so you can get the information from them as well. And usually, all the information that's listed on the instructions to handlers are pretty straightforward.
There's a long list of them. They have to put in information about themselves, the business concept they're putting in, the track record of the company, if there are certain criteria that HDB is looking for for that specific unit. Even the number of units, the number of established outlets a particular tenderer has, could be part of that evaluation criteria. All this would be very clearly laid out because HDB wants this process to be as transparent as possible, so when an interested party tenders for it, they know exactly how they will be evaluated.
In that, in that sense, it's open, free competition for everybody. If you think that you can meet that criteria better than the other tenderers, then you put in a good proposal based on that. Depending on that trade, that's the unique thing about HDB commercial spaces, is that every unit has a target trade has a specific trade that they're looking for. And this is because HDB has a certain need, basically, to rejuvenate the town precincts, to plug a gap, for example, if a certain estate has a missing trade, like they need a TCM clinic, for example.
Presenter:
So everything has been deliberately planned out, right?
Ethan Hsu:
That's right, and it will be explicitly stipulated. If somebody was selling bubble tea, for example, and they bid for that space, they will be disqualified.
Presenter:
The Ministry of Health (MOH) and the Housing & Development Board (HDB) have launched a new tender approach, the Price Quality Method model for GP clinics at HDB estates, and they've started it with the Bartley Beacon. How would this new model be more effective for future tenders?
Ethan Hsu:
Currently, HDB tenders are using either the price model, which is based on the tender price submitted, or the PQM model, which is the Price Quality Method (PQM) approach. When the PQM model was first launched, the scoring criteria was based on 50% on price and 50% on the quality of the proposal submitted. Subsequently, HDB revised that model to 60% quality and 40% price in 2023 to put more weightage on the quality of the proposals that were being submitted, to make sure that the residents needs were being addressed and they have access to quality services.
With the new PQM model that's going to be piloted from by MOH and HDB, that model will be even further tweaked to have 70% of the scoring criteria on the quality of the proposal submitted, and then the remaining 30% will be based on price. This helps to make sure to ensure that residents in the neighborhoods can have access to quality health care and also be supported in the long term, through chronic disease management services that MOH is trying to place within our neighborhoods.
Presenter:
Indeed, and that's something we'll see more of in the very near future. As you said, rightfully so, the aim is to keep the cost of primary health care affordable by placing them in these heartlands as well, making them accessible as well, but at the end of the day, they are still businesses that have to remain viable and stay open, quite literally. Can you go a little bit deeper and explain to us how this PQM model ensures this balance of needing to stay in business and also serving the public good.
Ethan Hsu:
Price is very easy to understand. 30% of it will go to price if your price meets the standard that they're looking for. But the quality model is pretty good, because it covers a range of things that MOH and HDB are looking for. When it comes to the concept that they are trying to achieve, they would be as explicit as possible to even stipulate how quality would be assessed in terms of whether they have a certain care model that they are putting in place, whether the clinic offers multidisciplinary care, the range of services that are available for chronic disease management, or whether the team they're putting in place have they undergone relevant training. The number of hours they are in operation will also be required, so that residents can get access to the services or to the products that they are selling within the reasonable hours of the day.
I think all these are put in place as part of the business proposal. They also look at things like your design, layout, of your shop format, whether you pay any attention to a sustainability the track record of the operators, as well as certain community efforts. Does the business give back to the community, by offering discounts for senior citizens, for example? Do they employ the elderly as part of their work plan, strategy? All these actually form the entire 70% of the scoring matrix that they have that is set aside for quality.
So in that sense, the government is trying to put in place a system or framework where the kind of quality that we are expecting, the levels we are hoping can be achieved for our residents, can be shaped while at the same time making sure that the proposal submitted is sustainable. Because the operator will have to show what kind of prices are going to put in place, how much will be spent investing in this business. What kind of revenues are expected per month, and whether it's sustainable for the long term. There are cases where, because of this, HDB may not award the tender to the one that puts in the highest price, because it may not be sustainable for them to.
Presenter:
Right, because there's a lot more criteria to meet. And it must be, like, you say, sustainable criteria. It must be a very long-term service that needs be met as well. That's a much clearer understanding of it. Thanks very much, Ethan.
Ethan Hsu:
Most welcome!