Shophouse Value Surge In Singapore

The increasing office rental had lead to the sale price of shophouse sale triple since January 2007. The surge of office rental had drive smaller and medium business to seek shophouse as an alternative

Transaction of shophouses for the first eight month of 2007 had almost increased threefold. Since January 2007, more than 30 shophouses had been sold for a total of more then SGD300 million. This is mainly due to high demand from small medium business lead by the steep increase of office rents.

Singapore appealing business environment and infrastructure had lead to many foreign companies to move their Asia headquarter here. Many companies are also expanding due the economic growth locally. All this had lead to increase in the property prices.

With the high demand and the acute shortage in supply, the office rents and value continues over the year. The small and medium company is feeling the impact when the multinational corporate willing to pay for the price of the prime and prestige locations. In order to relieve the rental cost and with not much option, the small and medium turn to seek shophouses as their next office alternative. Common tenants that lease shophouses are recruitment, architectural firm, design house.

The switch to shophouses as office had in turn increase the annual value of the properties. In November 2005, a row of eight shophouses were transacted in the range of SGD 18 million. Within 16 month, the same shophouses were transacted in the range of SGD 35 million, almost doubling the price. Similiarly, four units of shophouses of approximate size 6300 sqft at Tras Street were transacted in the range of SGD 7.7 million in November 2006. Within 2 months, a single 3600 sqft unit was transacted in the range of SGD 9 million.

Rental are soaring. The popular shophouse area such as Boon Tat Street, Amoy Street, Telok ayer, Tras Street are currently asking in the range of SGD$5 to SGD$6 psf for rental. In the beginning of 2007, similar shophouses were in the range of SGD$3 to SGD$4 psf. At the fringe of the central business district, taking Beach Road for instant, rental asking had increased from an average of SGD$2.50 psf to SGD $4 psf.

The sharp increased in the shophouses are still considerable reasonable as the prime traditional office had increased to an average of SGD$12 psf. For the same amount of space in shophouses, tenant are paying half of the prime traditional office. This is still an attractive for the small and medium companies.

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