Row of shophouses in the Katong district of Singapore.
Olivier Chouchana | Gamma rafo | Getty Images
SINGAPORE – The ornate, colorful ‘shophouses’ that line the streets of some of Singapore’s old neighborhoods are not what people immediately think of when they think of the city-state.
In a country where land is scarce and public housing can cost more than a million, these two- or three-story shophouses can cost tens of millions. But investors are still snapping them up.
Shophouses are colonial-era buildings – some built as early as the 1840s – that fall under a government conservation program.
From Jack Ma’s wife to Hong Kong superstar Jackie Chan and Spanish tycoon Ricardo Portabella Peralta, the rich and famous are reportedly among the buyers of Singapore’s retail properties.
Well-known Bridgewater founder Ray Dalio was also recently identified as the buyer of two retail properties on Club Street in Singapore. CNBC could not independently verify this.
Retail property sales volume in the first quarter of the year rose 52.2% from the previous quarter to $169.1 million Singapore dollars ($125 million), a report from real estate consultancy Knight Frank showed. It cited interest from high-net-worth individuals as a key driver of growth.
This is one of Singapore’s finite gems, you only have 6,000 units. Whatever is preserved can never be recreated.
Sebestien Soh
Meir Collective
The most expensive commercial retail properties along the streets of Telok Ayer, Boat Quay and Stanley Street can cost more than S$5,000 ($3,700) per square meter, said Mary Sai, Knight Frank’s executive director of capital markets. That’s double Manhattan’s Upper Fifth Avenue, the world’s most expensive retail rental destination.
One of the largest retail property deals last year was S$80 million for six adjacent retail properties bought by a Chinese investor.
The appeal of retail properties
There has always been interest in these retail properties as an alternative asset class or collectible, but especially so in recent years, real estate experts told CNBC.
“This is one of Singapore’s finite gems, you only have about 6,000. Whatever has been preserved can never be recreated,” said Sebestien Soh, chief placemaker at real estate and investment company Meir Collective.
There is no technology that can fully reproduce the intricate moldings and design elements, he said, adding that some investors keep them as collectibles.
Only the ultra-wealthy can afford to buy retail properties these days.
Faithful Chin
director, Propnex
Built between the 1840s and the 1960s during the colonial era, only about 6,500 of these storefronts are listed as preservation buildings. They can be used or leased for a range of applications – from food and beverage, boutique retail and family offices to other flexible purposes, according to Knight Frank’s Sai.
The appeal of commercial retail properties increased further when the government introduced a range of property cooling measures in April last year.
They include additional levies for locals buying a second home, and levies for foreigners wanting to buy a home.
Retail properties, which are largely classified as commercial, are exempt from these higher fees.
Colorful old shophouses in Cross Street, Chinatown.
Images from history | Universal Image Group | Getty Images
Currently, the majority of these retail properties are being snapped up by wealthy local individuals or companies over foreign investors, real estate experts told CNBC.
“Only people with very high net worth can afford to buy retail properties these days,” says Loyalle Chin, director at Propnex who specializes in retail properties. Ultra-high net worth individuals are those with a net worth of at least $30 million.
“People are looking for a safe haven to preserve their wealth,” says Chin, adding that these individuals are looking for safe real assets to invest their money in, among other more common forms of asset classes.
“And one area that is very attractive in terms of real assets, in Asia Pacific, is conservation assets,” he added.