Activity in the shophouse market was muted in the first quarter of 2025, as seen in a decline in the number and value of caveats lodged. But the segment could remain defensive amid macroeconomic volatility.

Shophouse sales in Singapore fell to 19 caveated deals in Q1, down from the 24 deals recorded in the previous quarter. The deals amounted to S$100 million, down 43 per cent in value compared to the last quarter.

Year on year, sales volume dropped 17 per cent from the 23 deals recorded in Q1 last year, and sales value declined 46 per cent from S$185 million.

In a market update on Thursday (Apr 24), PropNex attributed the declines to factors such as geopolitical tensions, impact of trade tariffs and a mismatch in pricing expectations, which resulted in investors becoming more cautious.

The top caveated deal in Q1 was the sale of a shophouse in the Telok Ayer conservation area for S$14.8 million, or S$12,488 per square foot (psf) on the land area of 1,185 square feet (sq ft).

This is followed by the sale of two adjoining shophouses on Lorong Liput in Holland Village for S$11.8 million, or S$7,027 psf on land area.

PropNex highlighted that there were fewer big-ticket shophouse purchases during the quarter, as out of the 19 caveats lodged, less than half were priced above S$5 million.

“Prospective buyers may also be prudent about acquiring investment properties at a high price quantum, in view of the still-elevated interest rates,” it said.

Leasing demand also slowed in Q1, with 836 rental contracts signed, down 4 per cent on quarter. Similarly, the value of rental contracts signed in Q1 fell to S$9.1 million, from S$9.7 million in the previous quarter.

Shophouse rentals remained measured in the recorded quarter, with a monthly median rental of S$6.47 psf, up 0.3 per cent on quarter and 0.6 per cent on year.

Rentals saw mixed performance in Q1 across various districts, said PropNex. District 15 (Katong and Joo Chiat) observed the highest rental increase of 12.2 per cent on quarter. This was followed by District 7 (Middle Road and Golden Mile) with a 6.4 per cent quarter-on-quarter increase. Meanwhile, rentals in Little India fell by 9.2 per cent on quarter.

“High overhead costs paired with cautious consumer spending is expected to put pressure on Singapore retailers and food and beverage operators. This may curtail their willingness to pay higher rents when renewals are up,” said PropNex.

While PropNex highlighted that escalating trade tensions could affect the investment appetite for shophouses, it believes that the market could weather the storm.

“In times of volatility, investors may seek more defensive commercial assets such as shophouses, which are limited in supply,” it said. “Their scarcity, heritage value and prime locations could help to preserve asset value and weather crises over the long term.”

It expects shophouses in District 8 (Little India and Jalan Besar) to make up a sizable portion of the total sales in 2025, as they are “more readily available” compared to shophouses in the city area.

Market watchers also expect a resurgence in the shophouse hotel investments sales market in Q2.

This comes as the purchase of a 48-key boutique hotel for about S$100 million is under way. The price tag translates to a near-record price of S$2.08 million per key, noted PropNex.

RB Family Office’s Hotel 1900 in Mosque Street, which has 138 rooms, was put up for sale in April at a guide price that is around the property’s S$170 million valuation.

“Notwithstanding near-term uncertainties, shophouse hospitality assets remain attractive as Singapore’s tourism sector is poised for another year of growth in 2025,” it added.

It also noted that shophouses leasing demand could be relatively stable in the near-term as occupiers may refrain from taking up more space, or relocate to pricier areas.