Why Invest in Commercial Office Properties in Singapore?


For many years, investors gravitated toward purchasing residential rental property primarily in Singapore. This was because they felt more comfortable with that market over time. However, Singapore’s government has imposed several extraneous taxes and other cooling measures recently, making a once viable market now seem unattractive. However, even though cooling measures imposed by the government have diminished interest in the residential real estate market, the same restrictions and taxes have not applied to the commercial real estate market.

Commercial real estate has thankfully filled the void for sidelined investors, and ironically carries a greater probability of yielding high rental returns than property that is zoned for residential use only.

So why is it a great time to invest? Commercial rental properties return between 4 and 8 percent yields when used as either factories or retail stores. But, Singapore’s recent distinction as a global business and finance mecca has also especially allowed a boom in the purchase and rental of affordable office space.

More than ever, business owners of high net worth are investing in commercial property in Singapore specifically to be used for office space. Singapore has quickly become the premier Asian destination for banking, wealth management and insurance. Areas like Shenton Way and Raffles Place house major banks and financial institutions. The nation’s Central Business District also now extends to Marina Bay’s Business and Financial Centre. Due to the area’s impressive growth, the need for office property has actually tripled in the last decade.

The profit on office space rental alone has increased by as much as 5.5% in the first quarter of 2014. A typical “Grade A” office space now runs about $9.90 USD per square foot. And due to high demand, landlord/investors are able to steadily increase their asking prices. As a matter-of-fact, the last four fiscal quarters have shown tremendous growth in the sale of commercial office space, with each quarter stronger than the last.

Some formerly all-residential buildings are now being sub-divided by floors or units and portions are being sold to private buyers for commercial use, strengthening the trend. Older warehouses and factories have been converted into loft office suites and each is being sold to separate investors. It is easier than ever to find a property in Singapore to convert to commercial office use. 

However, even though commercial property investing seems to be a sure thing right now, pundits warn potential buyers not to count residential properties out. As prices start to go down, affluent businesspeople still favour Singapore as a global business capital, and will continue to purchase residential real estate in the interim for its long term investment value.

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