Skip to main content Skip to footer

Shophouses: Old is gold if investors know where to look

Colliers REview Singapore blog - CM shophouses old is gold property investment demand

Planning to invest in a shophouse? Prime location, heritage charm and limited supply are driving investment demand for conserved shophouses in Singapore.


Conservation shophouses in Singapore had been 'instagrammable' long before being Instagram was even a thing. 

These heritage buildings, which have been built between the 1840s and the 1960s, have been beautifully preserved and are a prominent architecture form in Singapore's evolving cityscape. 

There are about 6,760 conserved shophouses in Singapore. Of these, more than 60% of the shophouses are located in the prime areas of Rochor, Outram, Singapore River, and Downtown Core. 
blog cm shophouses old is gold property investment demand 1

Owing to their heritage charm and limited supply, shophouses – particularly those in the city centre – have been highly sought-after.  

Shophouse sales rebounded strongly by 132% QOQ to SGD310 million in Q2 2021 after a decline of 53.6% QOQ in Q1 2021, owing to pent-up demand in Q4 2020. This brings H1 2021 shophouse sales volume to SGD444 million.  

 

"These heritage buildings, which have been built between the 1840s and the 1960s, have been beautifully preserved and are a prominent architecture form in Singapore’s evolving cityscape."

 
According to Steven Tan, Executive Director of Investment Services at Colliers, “Transactions for shophouses - a hybrid of residential, commercial and hospitality assets – started to pick up from 2015 and hit a new high in 2018. Based on our observation, investment interest for shophouses remains healthy, but as prices become firmer, some investors could be taking a breather.
Although sales have come off in 2019, we believe this is more of a temporary pause in the market and transactions should pick up in 2020. Generally, the fundamentals remain intact to support investor interest in shophouses, especially prime ones in the city.”

blog cm shophouses old is gold property investment demand 2

"Shophouses have emerged as an attractive alternative asset class for investors," said Donald Goh, Director, Investment Services in Singapore. "This is partly due to the relatively smaller investment capital outlay compared to that of acquiring en-bloc buildings. In addition, they present a potential for capital appreciation and should offer higher yields than residential units." 

Apart from boutique investors who continued to lead demand, investment interest in shophouses has also grown among property funds and investment companies exploring more alternative asset classes. 

Prices and yields of conserved shophouses vary depending on location, remaining land tenure, current conditions and approved usages. Based on data from URA, most of the shophouses transacted at around S$2,000 - 5,000 per square foot on strata area in 2020 and 2021 to date.

 

"Investors can unlock value [in shophouses] via redesigning, conversions to higher-use options, and creating clusters to drive foot traffic."

 

Currently yielding about 2.0-3.0%, shophouses offer the flexibility of property type usage, management autonomy for occupiers, and unique vintage value. 

 

Shophouses complement tight CBD office supply

Against a backdrop of rising office rents and tight commercial vacancy, shophouses also provide alternative commercial space for businesses. These heritage buildings complement the tight office supply in the CBD and enjoy healthy occupancies. 

blog cm shophouses old is gold property investment demand 3

Colliers estimates that the monthly rent of shophouses in the Central Region range from S$6 - 12 psf for ground floors and S$3 - 7 psf for upper floors. F&B and retailers occupy typical ground floors while upper floors could be for offices or service-oriented retailers such as spas, salons etc. 

Data for the retail vacancy in the shophouse subzones suggest that the majority of conserved shophouses enjoyed healthy occupancy levels in recent years. 

 
Unlocking the value in conserved shophouses

In the longer term, Colliers believes that conserved shophouses are resilient to market volatility. They are considered a safe-haven that can offer stable income and capital appreciation, evidenced by the generally upward trend in transacted rents and prices over 2015 to 2018 and now in 2021. 

Mr Goh added, "We recommend investors to focus on shophouses in prime and accessible locations. Investors can unlock value via redesigning, conversions to higher-use options, and creating clusters to drive foot traffic."  

 

You may also like:

Liked what you read? Subscribe to our mailing list for more thought-pieces on the latest in commercial real estate.

---

Article enquiries

Contact our Colliers Editorial team here.


Related Experts

Steven Tan

Executive Director

Capital Markets & Investment Services

Singapore

Steven has over 25 years in the real estate business and progressed through various roles in this industry from property management to valuation and auction then into investment sales to leading the  non-institutional capital markets – added to his original role as head of the auction team in Colliers Singapore.

Steven is known to preserve a close relationship with his clientele who are High Net-worth individuals - known in the local as Tow Kay (big boss in local dialect), investors from all walks of life and business partners big and small, making him the leading choice to head the non-institutional capital markets.

Steven was lauded for brokering the first freehold industrial sale in the year 2020 for 190 Macpherson Road at $88m. His other notable and worth-mentioning deals include the collective sale of 2-24 Phoenix Road at $42.6M which was sold above its reserved price and another industrial building (food factory) at 200 Pandan Loop at $56.8M.

Steven also qualified as a licensed appraiser with the Inland Revenue Authority of Singapore, a member of Singapore Institute of Surveyors and Valuers (MSISV) and member of Royal Institute of Chartered Surveyor (MRICS).

 

View expert

Donald Goh

Director

Capital Markets & Investment Services

Singapore

Donald Goh has over 22 years of experience in the real estate industry, having worked for both real estate investors and global real estate consultancies, and has a strong track record in Industrial, shophouses and Collective Sales. 

At Colliers, his main focus will be on growing Colliers’ Investment Services business pertaining to non-institutional clients. 

View expert