Here’s why investors are snapping up shophouses despite extremely low yields

They’re exempt from ABSD and SSD.

Property investors remain attracted to the iconic shophouse despite the fact that these assets offer extremely low yields.

A report by Savills revealed that investment activity in shophouses picked up in the last six months.
In the first quarter alone, $125.5 million worth of full commercial-zoned shophouses were transacted, up from $90.1 million in the fourth quarter and just $10.1 million in the first quarter of 2014.

“Although the yields of such properties are relatively low at around 1.5-2.0%, prices have stayed fi rm mainly because of their scarcity and appeal to investors, including overseas buyers, as they do not attract ABSD and Sellers Stamp Duty. As a result, full commercial-zoned shophouses have remained a popular investment alternative among investors, especially the conservation shophouses,” stated Savills.

Meanwhile, Colliers added that the range of businesses found in shophouses is expanding as shophouses are becoming a favored space solution among SMEs, new start-ups, artistic production firms, and small office outfits.

"This bodes well for landlords and master lessees who are looking to generate some form of return from these prized assets. Notwithstanding the cyclic fluctuations in transaction and price levels, the omnipresent demand from property owners, businesses and occupiers presents a potential upside for prices and rents," stated Colliers.

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