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With residential properties subject to new curbs, shophouses in city fringe locations are expected to gain more attention from investors due to their strong potential for capital gains and rental growth.
CBRE capital markets director Sammi Lim noted that shophouses in Singapore are highly sought after due to their unique architecture, heritage value and limited supply, reported Singapore Business
“Ultra-high net worth individuals who take mid to long-term views on preserving their capital in particular, are attracted to shophouses as their capital values hold steady. Their scarcity and sound real estate fundamentals have bolstered investors’ confidence that shophouses are worthy of long-term investment.”
To be particularly attractive, Lim said a shophouse should have a “winning combination” of solid frontage, strong tenant profile, good location, and the best of use – be it hospitality, retail or F&B use.
“Shophouses which have been upgraded, or have potential for further asset enhancement works to be carried out, also stand out,” she added.
While those in the CBD are sought after due to their prime locations, shophouses in city fringe areas like Kampong Glam, Little India, Jalan Besar as well as those in the east such as East Coast Road and Joo Chiat Road have gained the interest of investors.
In fact, a shophouse in Jalan Besar was clinched for $5.23 million – making it one of the big-ticket items sold through auction in the second quarter of 2018.
Besides shophouses, strata offices could also gain the favour of investors.
Lim said that strata offices tend to appeal to small- and medium-sized businesses as well as family offices who invest for protection against the volatility in office rental cycles.
“It is projected that office rents will continue to rise; and given the tight supply situation, some businesses invest in office strata units as a strategy to lock in their long-term operational costs,” she added.
But while residential property investors may consider alternative assets, demand for shophouses or stata offices are not expected to surge “simply because of higher ABSD”.
In fact, Lim expects demand for shophouses and strata offices to remain consistent over the next two to three years on the back of tight office supply and rising rents.
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