Investing in our Heritage

Shophouses are a unique and interesting asset class in Singapore. These units, often narrow small terraced houses, with a sheltered ‘five foot’ pathway in front, are prevalent in Singapore’s architectural history. Many of these units were built prior to World World II and found in the old city centres. Due to their historical significance, many of them are gazetted conservation buildings and thus carefully restored and conserve according to regulatory guidelines.

Due to the rarity and cultural value of shophouses, interest in this asset class has been very consistent. Property companies and private equity funds show heightened interest in this nice market in the past year, and we expect interest levels to remain similar to 2018. Ultra high net worth individuals who take long term view on preserving their capital in particular, are attracted to shophouses as they hold strong value. Investors can also use them for personal purposes. Many of them see the intrinsic value in buying into a piece of heritage, and this asset is highly prized in land-scarce Singapore.

When available in the market, adjoining units of shophouses are increasingly popular as they are rarer to come by and the buyers can explore various usages for the premises by tapping on the larger space configuration and economies of scale.

We have observed in the market that there are more estate sales among families who have owned the asset for generations and are looking to divest the shophouse and redistribute the funds. These families are focused on their non-property core business and are looking to make better use of their funds by cashing out. Shophouse sellers also include funds cashing out the capital upside from a purchase made five to ten years ago.

The data on price movements only track general price movements, but in general, prices have remained stable, with a few stand-out assets traded at higher price points. Price points vary depending on the highest value and the best use in a specific location. Shophouses that command a premium have a winning combination of a good location, with solid frontage, a strong tenant profile, and the best use, be it F&B, hospitality or retail. Shophouses that have been upgraded through extensive asset enhancements, or have potential for further enhancement works to carried out, also stand out.

Overall, investing in shophouses in Singapore is lucrative and future proof due to the scarcity of this asset class that is able to hold its value even during economic downturns. More importantly, what investor wouldn’t want to own a piece of Singapore history?

By Sammi Lim, Director Investment Properties, Singapore, CBRE Asia Pacific.