LAST week, interior furnishings firm owner Marcus Ng received a disturbing call from the landlord of his business premises.
The rent on his unit in a MacPherson industrial building is set to go up more than 30 per cent when his lease is up for renewal in three months.
'Sure, business has been good,' admits the 37-year old, whose company On Demand Contract and Services has been doing a brisk trade supplying wallpaper and carpets amid the property boom.
The good times have put a squeeze on the supply of commercial space as well as labour, leading to higher rentals and wages.
But he is not ready to stomach such a steep rental rise.
'If I can't bargain for a lower hike, I will move elsewhere,' said Mr Ng.
In another part of town, Mr V.S. Kumar, managing director of 100-strong courier company Network Express, is facing another form of rising expenses.
His drivers are clamouring for pay rises.
'They are saying: 'With the current salary you are giving us, our families can't afford to buy the same things anymore',' said Mr Kumar, 44, whose company is now reviewing salary packages.
He has come to realise the situation. 'If I don't give my new staff higher pay, they are not going to join us,' he says.
Stories such as Mr Ng's and Mr Kumar's are an increasingly common symptom of Singapore's economic boom.
The good times have put a squeeze on the supply of commercial space as well as labour, leading to higher rentals and wages.
Even rising residential rents are affecting some multinationals which pay for the housing expenses of their expatriate staff here.
Mr Dom LaVigne, executive director of the American Chamber of Commerce in Singapore (AmCham), noted: 'In the last three to four months, we've heard more from our members about the concerns they have about the higher cost of doing business in Singapore.'
AmCham has 520 companies as members, half of which are multinational corporations.
Steeper housing costs are starting to be factored into companies' expatriates packages, he said.
'Employees have indicated that they are not able to get as attractive housing (as in the past), particularly for larger families. They are asking companies to revise upward their housing allowances,' he said.
Just how acute is the labour market shortage?
Latest official figures show that job vacancies are 30 per cent higher in March than a year earlier, at 32,200.
Companies are also expected to dangle heftier pay rises next year in a bid to retain staff. Employers, who gave an average pay rise of 4.1 per cent this year, are expected to give 4.2 per cent next year, a survey showed.
But the area of the economy that has seen the most explosive increases is the rental of prime office space, known in the industry as Grade A space. This has shot up 87 per cent in the past 12 months to hit $11.51 per sq ft.
Even at such stratospheric prices, you would be lucky find a vacant spot at Raffles Place or Tanjong Pagar, said Mr Donald Han of office consultants Cushman & Wakefield.
Grade A offices are bursting at the seams, with about 1 per cent to 2 per cent vacancy rates, he reported.
But it not just Grade A rentals that are rising. Office rentals islandwide have surged 30 per cent to 35 per cent year-on-year.
The office supply crunch will probably ease in 2010, but recent Government measures to release land for temporary offices go some way to easing the shortage, said Mr Han.
Not all business are hurting, though.
The effect of rising rents and manpower costs on local small and medium-sized enterprises (SMEs) differ across industries, said Mr Lawrence Leow, president of the Association of Small and Medium Enterprises (ASME) .
SMEs in the commercial and retail sectors are 'without doubt more affected' than manufacturers using industrial properties, he said.
Higher office and residential rents have led to musical chairs of sorts - with firms and expats moving further away from prime districts.
Take Mr Philip Marcelo, owner of small insurance outfit Worth Insurance Agencies, for instance.
'They are pulling down my old office building to build a new one, so we moved from the heart of the Central Business District to the edge of the city two weeks ago,' said Mr Marcelo, 58.
Not only is he paying double the rent, but he is also making do with a smaller space.
UniGroup Worldwide UTS, an American mover that handles global expatriate relocations for Fortune 500 companies, has reported a curious trend here.
Since March, their Singapore office has seen a 50 per cent surge in local moves for expatriate families.
Eight out of 10 of the increases are cases of expatriates moving from upscale areas in Districts 9, 10, and 11 to outlying areas such as Ang Mo Kio.
'I believe this is just the beginning of a widespread migration of expatriate families to more suburban and affordable areas of Singapore, and we expect this trend to continue should home rental hikes persist,' said Mr Bill Brill, UniGroup's Singapore general manager.
In spite of rising business costs, many firms still find Singapore a competitive place to be, says Mr LaVigne.
'Singapore still has one of the highest labour productivity figures in the region,' he said. 'Our members are pretty pragmatic. They realise that this is part of a cycle, (and) eventually, there may be a downturn in the market.
The majority of members, he said, 'are committed to their businesses here long-term'.
ASME's Mr Leow, too, believes that 'as a whole, when the economic outlook remains good and businesses continue to thrive, rising costs are manageable for SMEs'.
