Can Singaporeans Buy Commercial Property – And Is It Worth the Investment?
The Singapore commercial property market is open to all: local citizens, Permanent Residents, and foreigners (including foreign companies) can buy office and retail properties. Under the Residential Property Act and Land Authority guidelines, foreign buyers are allowed to purchase commercial-grade properties (including retail shops, offices, shophouses for business use, and hotels) without special approval. In effect, foreign investors enjoy the same privileges as locals when buying commercial real estate.
Companies (Singapore-incorporated or foreign) can likewise invest in commercial units; in practice, deals are often structured through local corporate vehicles or trusts. Notably, Additional Buyer’s Stamp Duty (ABSD) – a tax on residential purchases – does not apply to commercial acquisitions. Buyers should still pay the standard Buyer’s Stamp Duty (BSD) on the purchase, but there is no income cap or quota on commercial purchases for locals or foreigners.
Key points on eligibility and taxes:
No foreign ownership restrictions: Foreign individuals and companies can buy retail and office property (e.g. shophouses, strata offices) without approval.
No ABSD: Commercial purchases are exempt from Additional Buyer’s Stamp Duty (unlike residential).
Stamp duty and financing: Buyers pay normal BSD (1–4% on value tiers) but may not use CPF savings. Loan financing (up to 80% LTV) is available, subject to the Total Debt Servicing Ratio rule.
Property tax: A flat 10% property tax (based on annual value) applies to non-owner-occupied commercial buildings.
Types of Retail and Office Properties
Commercial property in Singapore spans a range of retail and office formats.
Retail units include strata-titled shops in malls, shophouses (e.g. Chinatown, Haji Lane), and street-front shops (e.g. along Orchard or suburban hubs). Mall retail units are common in both the CBD (Orchard Road, Raffles Place, Marina Bay) and heartland towns (Tampines Mall, Jurong East Mall, etc). Boutique standalone stores or entire retail buildings (e.g. a freehold retail podium) are also traded.
Offices range from Grade-A CBD towers (Raffles Place, Shenton Way, Orchard Road) to business parks/suburban offices (Woodlands, One-North, Changi Business Park, Joo Koon). Many offices are sold on a strata basis (individual floors or units in a larger building), while entire buildings (often 5–10 storeys) occasionally come up for sale.
Both retail and office assets exist in strata vs whole-building form. Strata-titled units allow investors to buy just one or a few floors/units (e.g. “6th floor of Orchard Tower”), often at a smaller entry price. Whole-building purchases (e.g. a standalone shophouse or a midrise office block) command higher outlays.
Typical prices: According to Knight Frank data, the average strata office unit sold around S$2,190 per sq ft in the first half of 2024. Retail units in city fringe/CBD areas often trade higher – Knight Frank reports an average of about S$3,010 psf for strata retail in late 2024. For example, a strata retail shop on Orchard Road might change hands for several million dollars (e.g. S$14.0M for ~3,400 sq ft at Tong Building, or ~S$4,080 psf). In general, CBD and prime locations command the highest prices, while suburban and fringe sites are cheaper.
Example (Office): VisionCrest Orchard (freehold strata offices) have seen sell-ups at around S$4,000+ psf. In Q2 2024 Knight Frank noted boutique CBD offices (Vision Exchange, Suntec City) selling at ~S$2,378 psf.
Example (Retail): A small strata shop at The 101 (River Valley) sold for S$8.7M (~S$3,200 psf), while a unit at One Claymore went for S$9.2M. Whole shophouses in prime districts often fetch tens of millions.
Why Invest in Commercial Real Estate?
Investing in retail and office properties can be attractive for several reasons:
Higher Rental Yields: Commercial yields are generally higher than residential. Banks note average gross yields around 5% for commercial properties (versus ~2–3% for private homes). Net yields (after costs) run roughly 3–5%. (For example, an office bought at S$2,500 psf renting at S$6 psf/mth yields ~2.9% gross.) Prime retail (e.g. Orchard shops) yields may be lower (~3–4%), while suburban retail and smaller offices can yield 5–6%.
No Cooling Taxes: Unlike residential purchases, commercial investments are not subject to ABSD or Total Debt Servicing restrictions specific to home loans. Investors can often finance up to 80% of the purchase value. This lowers the initial cash outlay compared to residential (75% LTV for new home loans).
Lower Taxes: Non-residential property tax is a flat 10% of annual value – generally lower than residential tax (which can reach 20% for non-owner-occupied homes).
Capital Growth: Over the past decade, prime commercial properties have appreciated steadily. For example, office rents in the CBD have risen about 25% since 2021 on tight supply. In 2023, islandwide central office prices surged ~13% before stabilizing in 2024. Retail prices are more modest but have grown post-pandemic (URA’s retail price index was +1.0% in 2024). Unlike HDB flats, commercial buildings have no income ceiling or ethnic quotas limiting buyers, allowing more consistent demand.
Residential vs Commercial (Summary Comparison):
(Sources: DBS, URA, Knight Frank.)
Benefits of Commercial Leases
Commercial properties offer flexible usage and leasing options. Investors can occupy part of a property (e.g. run a business in a shop they own) while leasing out the rest, or convert usage (subject to URA approval) more readily than with residential. Commercial leases often run longer (2–5+ years) with professional tenants (corporates, retailers), which can provide stable rental income. During economic cycles, offices and shops in good locations tend to find tenants sooner than mid-market condos sell – especially since many office tenants prioritize proximity and amenities. Overall, the combination of higher yields, tax advantages, and growing demand (especially post-COVID tourism and business expansion) makes retail/office assets a compelling addition or alternative to residential holdings.
2024–2025 Market Outlook
Policy and Economic Trends: The government continues to shape Singapore’s commercial landscape via zoning and infrastructure, not through ownership restrictions. Initiatives like Jurong Lake District and Paya Lebar Central aim to decentralize offices, while plans for more mixed-use developments (e.g. TOD malls) expand retail space in heartland towns. No new cooling measures target commercial property, and corporate tax incentives (e.g. PIC) indirectly support business growth. Interest rates, though moderating, remain higher than earlier in the decade, which may temper investment demand in the near term.
Demand and Supply: New office supply was front-loaded in 2023–2024 (e.g. IOI Central Blvd, Punggol, Keppel South areas), which led to higher vacancies. However, little new prime supply is expected through 2026, so markets should tighten again. URA reports island-wide office vacancy at 10.6% by end-2024 (down from 11.0%), and a very low core CBD vacancy of ~3.6% (as of Q1 2024). Demand is being driven by financial, tech and healthcare firms seeking centrally-located or high-quality space.
Retail spaces are seeing gradual recovery. As tourism rebounds, retail occupancy is up: URA data show retail vacancy fell to 6.2% by end-2024 – near pre-COVID lows. Prime retail rents have been rising modestly (URA reports +0.6% q-o-q for Q4 2024, about +3.6% for 2024). Fringe malls and shophouses remain popular with food & beverage and specialty retailers. On the flip side, rising costs and e-commerce keep some pressure on secondary retail rentals.
Rents and Prices: After a strong rebound post-COVID, office rents are flattening. Central-Raffles-Place grade-A rents crept up ~1.3% in H1 2024 and CBRE projects only ~2% growth in 2025. For 2024 as a whole, URA notes island-wide office prices held flat (0% change) after jumping +13.1% in 2023. In contrast, retail rents grew ~3–4% in 2024 (prime rents were +0.7% qoq in Q4), and prices edged up 0.5%.
Overall, market sentiment is cautiously positive. Limited new stock and the flight-to-quality trend (corporates seeking the best buildings) support core commercial values. Any soft spots (e.g. excess suburban office space or secondary shops) are offset by targeted demand (e.g. biomedical companies, tourism). With interest rates likely peaking and Singapore’s economy still leading Asia, analysts expect modest growth in values and rents through 2025, particularly for prime office and retail nodes.
Real-World Transaction Examples
Recent transactions illustrate pricing and yields:
Tong Building, Orchard Road (Strata Office, Freehold): In Sept 2024, Parkway Hospitals (part of IHH Healthcare) paid S$31.33 million for the entire 6th floor (≈6,864 sq ft) of Tong Building. That works out to ≈S$4,562 psf, a record benchmark price for Orchard offices. Parkway, already a tenant, acquired it for its own use. (Yields on this basis are ~3–4% given the paid price.)
Tong Building, Orchard Road (Strata Retail): A separate strata retail unit at Tong Building sold for S$14.0 million in Aug 2024 (about S$4,080 psf). This was the largest single retail deal in H2 2024.
One Claymore, Orchard Road (Strata Retail): A retail unit sold for S$9.2 million in Sept 2024.
The 101, River Valley (Strata Retail): A shop sold for S$8.7 million in Aug 2024.
Solitaire on Cecil, Cecil Street (Freehold Office Strata): Back in Apr 2023, a buyer paid S$162.8 million for three whole strata floors (37,857 sq ft total) of this freehold tower (≈S$4,300 psf). This was an owner-occupier deal for a financial firm.
These examples show that prime CBD assets command prices in the S$3,000–4,500 psf range. Investors buying such properties at those prices can expect gross rental yields in the mid-3% range (on older leases) and the potential for rent and capital growth as demand picks up. Smaller suburban and non-core deals can yield 5–6%. Buyer profiles vary: many are local or regional corporations (e.g. banks, healthcare groups, property companies) rather than individual investors, reflecting the commercial market’s scale and clientele.
Summary
In Singapore’s commercial market, virtually anyone – locals or foreigners, individuals or companies – can buy retail and office properties with few restrictions. Such properties typically offer higher rental yields and fewer taxes or duties than residential assets. Though prices and rents are influenced by global economic cycles and interest rates, prime retail and office locations have shown steady demand and long-term appreciation. For investors, this means access to good income (often 4–6% gross yields) and the potential for capital gains, without the extra levies that apply to homes.
Sources: URA market releases; CBRE and Knight Frank research; industry reports and news. These authoritative data inform our insights on eligibility, yields, and market trends.
