Bookmark & Share
As office rents in Singapore continue to rise, demand for cheaper alternatives in the form of shophouses are forecasted to increase as well, according to property experts as cited in media reports.
“If you compare the rents for shophouses and office buildings in the Central Business District (CBD), it is really at about half-price,” said Cushman & Wakefield’s Research Director Christine Li.
“So without paying S$10 per sq ft per month for a Grade A office building, they can just pay S$5 to S$6 for a shophouse next to it.”
Given this, tenants, especially those from the creative sector who do not require premium office specifications but still want the convenience of staying within the central business district (CBD), begin to look at shophouses as the alternative.
For instance, shophouses in Amoy Street have been occupied by restaurants, creative outfits and small businesses that are seeking affordable office space. Based on URA data, 25 shophouses have changed hands since the beginning of 2015.
But because these properties have become more sought-after, their rents have taken an upward trajectory.
According to Colliers International’s report in March, the quarterly median rents of shophouses have generally remained below S$4 per sq ft per month prior to 2012. It subsequently reached that level for the first time in Q1 2012 and has since risen by 35.5 percent to a record-high of S$5.42 per sq ft in Q4 2014.
Despite the rise in demand and rental prices, analysts cautioned that these properties are not necessarily the best asset type to invest in because their rental growth lags behind the rise in capital values.
“Your yield for conservation shophouses these days is at about 1.5 to 2 percent, definitely less than 3 percent,” noted Donald Han, Chestertons’ Managing Director for Singapore.
“For investors looking at shophouses as an investment class, despite it being limited in number, they would have to hold on to an asset with lower returns, compared to other asset classes like residential that might give in excess of 3 to 4 percent. Commercial strata offices might give you yield of about 3 to 5 per cent, industrial maybe about 7 percent,” he added.
Nikki De Guzman, Editor at CommercialGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
Related Articles:
VivoCity adds 15,000 sq ft of retail space