SINGAPORE – Shophouse transactions are hitting new highs, fuelled by the limited stock of conservation properties, low interest rates and strong demand from local and foreign investors.
Investors, including family offices, high net-worth individuals and boutique real estate funds, are drawn to commercial shophouses, as they offer capital preservation during economic uncertainty due to their strong heritage value and limited supply.
Cushman & Wakefield noted that sales hit $1 billion by Aug 5, surpassing the $900 million level reached in 2019 and again in 2020.
“The transaction levels for the year to date are the highest in almost three years, with the last peak at nearly $1.5 billion in 2018,” said Mr Wong Xian Yang, head of research for Singapore at Cushman & Wakefield.
Last month, two 999-year leasehold shophouses – 44 and 46 Club Street owned by Arcc Holdings and its chief executive, Mr Tony Chen – sold for a total of $25.5 million, or $3,935 per square foot (psf) of gross floor area (GFA).
The buyer is believed to be a foreign-based family office, the company told The Straits Times.
Mr Chen, a long-term investor in conservation shophouses, said: “Even though the yields are low for conservation shophouses, they fulfil the objective of capital preservation.”
Mr Wong noted that Realis data showed that the prices for the two Club Street shophouses more than tripled over 12 years.
But in terms of price quantum, the record is still held by 8M Real Estate, which bought four shophouses – 265, 267, 269 and 271 South Bridge Road – from a subsidiary of Eu Yan Sang International for $54 million in 2019.
Shophouse transactions hit 118 in the first half of the year, up from 90 in the second half of last year and the last recent high of 99 in the first six months of 2018, noted Knight Frank Singapore.
A pair of shophouses at 59 and 60 Duxton Road that had been owned by Mr Alan Choe were sold last month at $14.8 million. The deal was brokered by PropNex Realty marketing agent Loyalle Chin, who is also marketing a shophouse at 93 Club Street for $9.9 million.
Mr Choe, the first general manager of the Urban Renewal Unit in 1964, a forerunner of the Urban Redevelopment Authority, told ST that he had bought two other leasehold shophouses, at 40 and 41 Duxton Hill, for $24.8 million in 2018. While freehold shophouses still accounted for around 80 per cent of transactions in the first half of this year, leasehold sales volume more than doubled to 25 units from the second half of 2020.
Buyers who were drawn by hopes of capital appreciation showed interest in better-located leasehold shophouses, with over half of the leasehold transactions located in prime District 2 (Anson, Tanjong Pagar), Knight Frank Singapore said.
Nearly 57 per cent of shophouses sold in the first half of 2021 were above $5 million, compared with 42.2 per cent in the second half of 2020.
The top five deals by price quantum were in Districts 1 and 2. A tenanted three-storey conservation shophouse at 91 Tanjong Pagar Road sold for more than five times the previous sale price after being held for about 15 years.
Knight Frank Singapore said shophouse sales values in 2021 could exceed the $1.46 billion high recorded in 2018, and with transactions to exceed 200, if demand continues to gain momentum.
Shophouse sales in the second half of this year could set new benchmark prices, it added.
“Shophouses in prime CBD locations such as Stanley Street, Amoy Street and Telok Ayer are already transacting at over $4,000 psf on GFA. In the past eight months, prices have jumped to $3,800 to $4,000 psf from $3,000 in Districts 1 and 2,” said Ms Mary Sai, executive director of capital markets at Knight Frank Singapore.
Commercial shophouses are generally exempt from Additional Buyer’s Stamp Duty (ABSD), but those that are zoned both commercial and residential are subject to ABSD for the residential component.
Mr Wong noted: “CBD conservation shophouses offer bite-sized exposure to the CBD commercial market. Given the looming risk of cooling measures, some investors are considering commercial shophouses as an alternative investment.”
“Source: [Shophouse transactions hit $1 billion for year to date, surpassing levels in 2019 and 2020] © Singapore Press Holdings Limited. Permission required for reproduction”
