Y-series: 5 reasons why conservation shop-houses in Singapore remain popular among investors

Summary: Despite low gross yields of 2% to 2.5% on average, conservation shop-houses in Singapore remain sought after among wealthy individuals, family offices and institutional funds. We believe this is because of their limited supply, historical value, prime locations, revamp potential, and less stringent buyer requirements (no restriction on foreign ownership nor ABSD, unless there is residential component). We expect these features to lead to their continued value appreciation over time.   

Conservation shop-houses – Long in history, short on supply

The older parts of Singapore are dotted with old and charming 2 and 3-storey conserved shop-houses. Many of them are also architecturally distinct, with land tenures ranging from 99- year leasehold to freehold. There are over 7,000 such property gazetted for conservation in the entire island of Singapore. Given the short supply, many investors see conservation shop-houses as “limited-addition” assets. It has also become a rare opportunity (especially for foreign buyers) to buy and own landed property through such shop-houses.

We began our research journey by noting that the majority of conservation areas in Singapore fall into four distinct categories (according to URA, or Urban Redevelopment Authority, the national planning and conservation authority in Singapore):

  • The Four Historic Districts (see table below), mainly in the city centre, where shop-houses are among the city’s oldest areas (some are dated as early as 1830s), and where entire buildings have to be retained and restored, under URA’s conservation guidelines,
  • The Secondary Settlements (see table below), which are located outside the city centre, and were largely developed between the 1900s and the 1960s as a result of outward movement of the population from the city centre,
  • The Residential Historic Districts, which include Blair Plain, Cairnhill and Emerald Hill (along Orchard Road), and
  • The Bungalows, which include Good Class Bungalow Areas and Fringe (e.g. Chatsworth Park, Holland Park/ Ridout Road, Nassim Road/ Whitehouse Park).

We visited mostly the first two categories of The Historic Districts and Secondary Settlements.

4 Historic Districts Sub-districts
Boat Quay Bounded by South Bridge Rd, Circular Rd, Lorong Telok and North Canal Rd
Chinatown 4 sub-districts are:

  1. Kreta Ayer (e.g. New Bridge Rd, Cross Rd, Sago St, Trenggano St, Pagoda St);
  2. Telok Ayer (e.g. Boon Tat St, Amoy St, Stanley St, Ann Siang Rd, Erskine Rd);
  3. Bukit Pasoh (Keong Saik Rd, Kreta Ayer Rd, Neil Rd and Cantonment Rd) and
  4. Tanjong Pagar (e.g. Maxwell Rd, Peck Seah St, Wallich St, Craig Rd, Tras St)
Kampong Glam Bounded by Ophir Rd/ Rocher Rd, Victoria St, Jalan Sultan, Arab St Liang Seah St, Tan Quee Tan St
Little India Bounded by Serangoon Rd, Sungei Rd and Jalan Besar


Secondary settlements Beach Road, Tiong Bahru, Mount Sophia, River Valley, Jalan Besar, Geylang, Balestier, Jalan Jurong Kechil, Tanjong Katong, Joo Chiat

Source: URA, DimSum Property

Y-series Nov 16 Singapore shophouse slide summary - creative 6 - for blog post - 4 districts.png

4 Historic Districts in Singapore, Source: Google, DimSum Property

Tenant-wise, we noticed shop-houses being converted to boutique hotels, or tenanted out to F&B operators such as cafes and bars (mostly on ground floors), bridal shops, dance studios, spas and aesthetics clinics. URA has very strict guidelines for F&B licenses for shop-houses; some are approved for temporary use (renewed every 1-2 years), while others are approved for permanent use. Some shop-houses are also owned by clans and associations, for example along Bukit Pasoh Road. There is a growing range of new tenants such as SMEs, new start-ups, boutique fund houses, and even co-working outfits. Rents also differ, with CBD shop-houses renting at S$8-10 psf/ mth for ground-floor F&B, and S$5-8 psf/ mth for typical office spaces.

Most shop-houses allow for asset enhancement initiatives (“AEI”) but within conservation guidelines stipulated by URA. We have seen shop-house owners buy adjacent units and amalgamate to provide bigger floor space and build up. They may also seek URA approval to increase GFA through large patio conversions, or write in to URA to request for change of tenant use (e.g. secure F&B license for a previously non-F&B tenant space).

Recent transactions reflect strong interest 

Although general market conditions have weakened, recent transaction values have shown strong interest in shop-houses. According to Business Times, several high-profile transactions took place in the shop-house market in 3Q16, which we document some of them as below.



Total value
Value in PSF
Gross yields
Fragrance Food
New Bridge Rd
99 years
Axe Brand
11&13 Bukit Pasoh Rd
60 Boat Quay
Singapore River
999 year
18 Circular Road
Singapore River
999 year

Source: Business Times

Why are conservation shop-houses popular among investors despite low yields?

Most shop-house buyers believe prices will continue to appreciate over time, despite low gross yields of 2% to 2.5% on average. We summarise in 5 reasons as below.Y-series Nov 16 Singapore shophouse slide summary - creative 6 - for blog post -pt1.jpg

  1. Limited supply. According to URA, over 7,000 buildings in Singapore have been gazetted for conservation. They are located mainly in the city centre and around its fringes, and comprise largely shop-houses and bungalows. These heritage-buildings are no longer in new supply, and this enhances their scarcity appeal to investors.


  1. Historical value. These shop-houses have high historical value, as many of them were constructed between 1840s and the 1960s, forming the majority of the pre-WW2 urban fabric of the old city centre. They provide a valuable link to Singapore’s heritage and conserving them is an integral part of Singapore urban planning. Thus, many investors consider them as rare gems, and are proud to be owners due to their heritage value and uniqueness.


  1. Prime locations. Most shop-houses are strategically located in the CBD, and in prime land that are highly sought after by investors, retailers and F&B operators. Many of them have long land tenures (if not freehold), and they are located very close to existing offices, hotels and malls, which allow them to benefit from resultant traffic flow.


  1. Revamp potential for Conservation Areas. Conservation shop-houses are likely to benefit from the government’s plans to continually improve vibrancy in the Conservation Areas. These plans include:
  • Place Management. This is a coordinated, multi-stakeholder approach to improve precincts. Examples are Singapore River One and Marina Bay areas. The key objective is for all vested stakeholders, both public and private, to have a say and work together to manage the precinct. The aim is to increase marketing, footfall, business sales, property values, lease rates and occupancy rates of the areas. A successful Place Management could pave the way to move towards a BID model.
  • Business Improvement Districts (or “BID”). This model has yet to be introduced in Singapore. According to URA’s Skyline issue 4 (2016), BID has been a successful model applied in many countries including North America and Europe. In this model, a precinct will form an association with the support of legislation known as the BID, where all stakeholders in the precinct get together to devise a formal business plan to improve the precinct, to cast votes on it (in an independent ballot), and if approved, all parties have to pay a mandatory levy for about five years. This could be a fair and more egalitarian and sustainable alternative to improve precincts, since it will be a mandate for everyone to pay a levy towards the BID organisation.
  • Innovative ideas such as pedestrianization (read car-free or car-lite) every weekend to attract more visitors. Kampong Glam, Club Street, Ann Siang Road are partly pedestrianized, while parts of Chinatown are permanently pedestrianized. With positive reception, these ideas could be extended to more days and new areas.
  • Inject more residential communities in CBD. Lastly, the government’s efforts to inject more housing within the CBD will lead to more activities and bring customers to the shop-houses. For example, the DUO project in Rochor/ Ophir Road will complete its 49-storey Residences Tower by 2017 and bring in 660 new homes and provide greater catchment audience to shop-house businesses.


  1. Less stringent buyer requirements. There are no restrictions on foreigner ownership nor additional buyer’s stamp duty (ABSD) or sellers’ stamp duties (SSD) on conservation shop-houses with full commercial zoning (i.e. no residential components in them). As a result, full commercial-zoned shop-houses have remained a popular investment alternative among investors, both local and foreign.

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