Row of commercial buildings in the Katong district of Singapore.
Olivier Chouchana | Gamma-rapho | Getty Images
SINGAPORE — The ornate, colorful shophouses that line the streets of some of Singapore's old neighborhoods are not necessarily what first comes to mind for most people when they think of the city-state.
In a country where building land is scarce and social housing can cost over a million, these two- or three-story commercial buildings can cost tens of millions. But investors snap them up anyway.
The shophouses are colonial-era buildings – some were built as early as the 1840s – that are under a state heritage protection program.
From Jack Ma's wife to Hong Kong superstar Jackie Chan to Spanish tycoon Ricardo Portabella Peralta, the rich and famous are reportedly among the buyers of Singapore's commercial buildings.
Well-known Bridgewater founder Ray Dalio was also recently identified as the buyer of two commercial buildings along Club Street in Singapore. CNBC could not independently confirm this.
Sales volume of shophouses rose 52.2 percent quarter-on-quarter to 169.1 million Singapore dollars (125 million US dollars) in the first quarter of the year, according to a report by real estate consultancy Knight Frank. Interest from high net worth individuals was cited as the main driver of growth.
This is one of Singapore's few jewels, there are only around 6,000 units left. What is preserved can never be restored.
Sebastian Soh
Meir Collective
The most expensive commercial buildings on Telok Ayer, Boat Quay and Stanley Street can cost more than S$5,000 ($3,700) per square metre, said Mary Sai, executive director of capital markets at Knight Frank. That's double the price of Manhattan's Upper Fifth Avenue, the most expensive retail rental area in the world.
One of the biggest deals last year was for S$80 million for six adjacent heritage-listed commercial buildings bought by a Chinese investor.
The appeal of shophouses
Real estate experts told CNBC that there has always been a lot of interest in these storefronts as an alternative asset class or collectible, but especially in recent years.
“This is one of Singapore's limited gems, with only about 6,000 residential units here. What remains can never be restored,” says Sebestian Soh, chief placemaker at real estate and investment firm Meir Collective.
There is no technology that can fully reproduce the intricate shapes and design elements, he said, adding that some investors keep them as collector's items.
Nowadays, only very wealthy private individuals can afford to buy commercial properties.
Loyal Chin
Director, Propnex
Only about 6,500 of these commercial buildings, built during the colonial era between the 1840s and 1960s, are designated heritage buildings. They can be used or leased for a variety of purposes – from hospitality to boutiques to family offices and other flexible uses, said Knight Frank's Sai.
The attractiveness of commercial premises increased even more when the government introduced a series of measures to cool the real estate market in April last year.
These include additional taxes for locals who purchase second homes and customs duties for foreigners who want to purchase residential property.
Shops that are predominantly considered commercial are exempt from the higher fee.
Colorful old shophouses in Cross Street, Chinatown.
Images from History | Universal Images Group | Getty Images
Currently, most of these commercial buildings are being bought up by wealthy local individuals or companies over foreign investors, real estate experts told CNBC.
“Nowadays, only the super-rich can afford to buy shophouses,” says Loyalle Chin, director at Propnex and a shophouse specialist. The super-rich are defined as people with a net worth of at least $30 million.
“People are looking for a safe haven to preserve their wealth,” Chin said, adding that these individuals are also looking for safe real assets to invest their money in, in addition to other, more common forms of investment.
“And one area that is very attractive in the Asia-Pacific region in terms of real assets is conservation assets,” he added.