The story of shophouses within the CBD has already been adequately covered over the past few years. Location, location, location – this has always been a key factor to consider when investing in real estate. Due to the intense popularity of shophouses, supply is very tight, with little room for negotiation as both sellers and buyers are at a standoff in terms of price.

Shophouse investors are now beginning to set their sights on two other conservation areas with tremendous potential in terms of capital and rental growth: Kampong Glam in District 7 and Little India in District 8.

Kampong Glam, known for its rich cultural history and trendy lifestyle scene, holds a lot of promise. Located to the north of the Singapore River, in the planning area of Rochor, it is in close proximity to the Bugis precinct. This is an added bonus, leveraging on the promise of revitalisation in the area.

Guoco Midtown is in the works (expected completion in 2022); Shaw Tower will be redeveloped in 2020 (slated for completion in 2023); Golden Mile Centre and Textile Centre will be redeveloped alongside these new developments if their attempts at collective sale are successful.

The upcoming new developments, together with the recently completed developments such as City Gate, Concourse Skyline, Duo Residences and South Beach Residences, will bring about a major rejuvenation within the Ophir-Rochor corridor. The recently completed residential developments have contributed to over 1,500 residential units added in the area (excluding the highly anticipated government land sales (GLS) parcel at Tan Quee Lan Street that has a tender closing on Sept 5, 2019). There is a self-sustaining footfall that is likely to increase further, generated through the new residents and office/hotel occupants, thus breathing a new lease of life into the existing buildings, as well as the reshaping of the trade mix, leisure, and F&B options.

This is a timely window for shophouse investors with a medium- to long-term view on investment. It is an opportune time to start planting the seeds of investing in a new growth location. Rents in the area have returned to an uptrend since 2017. This year, District 7’s average rent rose to $5.14 psf, surpassing the previous peak of $4.96 psf. The rental data displays tremendous rental growth potential in the locale as tenants are witnessing improving business sentiments, firm economic growth and recovering retail sales, which give them a vote of confidence to support the rise in rents.

Transactions volume within Kampong Glam has been growing steadily since 2016, while prices remain relatively flat as compared to 2015. On average, freehold shophouses there are transacting at $2,800-$3,300 psf on estimated floor area or $4,000-$4,500 psf on land area. One of the most popular streets within Kampong Glam, Haji Lane – known for its indie retail stores, street brands and hip cafes – saw shophouse transactions attaining a historical high of about $5,000 psf on estimated floor area in 2015. With rentals rising steadily and current prices remaining relatively flat, it offers a good window of opportunity for investors who are seeking to acquire an asset within a growth location.

Kampong Glam is still largely considered to be at the fringe of the CBD and this heritage enclave is slowly giving way to the gentrification of the old trades, while redefining itself as an expansion of the CBD.

Another enclave that investors could consider is Little India. Known for being a buzzing historic area and its wide spread of delicious Indian cuisines, its transaction volume and rental rates have been rising at a healthy pace since 2017, with prices remaining relatively flat.

Prices within Little India have not deviated far from where they were in 2015. On average, freehold shophouses there are transacting at $1,450-$1,650 psf on estimated floor area or $2,800-$3,300 psf on land area. The area retains a strong cultural and heritage charm, with a gradual shift towards some diversity in trade make-up, F&B and office tenants. Several co-working players have found their niche in this charming enclave with its growing mix of retail malls, as well as reputable hotel brands alongside boutique hotels.

Little India is minutes from the CBD and accessible by public transport and a network of expressways. The Conservation Area has multiple MRT stations surrounding it: Little India Interchange for the North-East and Downtown Lines; Farrer Park on the North-East Line; and Jalan Besar and Rochor both on the Downtown Line. This grants accessibility to other parts of the island effortlessly regardless of where you are within the Conservation Area.

The soon-to-be-completed Tekka Place, which is a joint development between Lum Chang and LaSalle Investment Management, is a highly anticipated integrated development comprising retail and serviced residences. The serviced residences will be managed by top international brand Ascott (named as Citadines Rochor Singapore). The completion of Tekka Place is expected to rejuvenate the locale by creating higher and steady stream of footfalls and introducing new retail concepts.

Just outside the boundary line of the other end of Little India, Centrium Square is in the works and slated for completion in 2020. Complementing City Square Mall and Mustafa Centre, the retail cum office and medical suites development is expected to further boost footfalls and invigorate the buzzing scenes within Little India.

The Little India shophouses lend a unique value proposition of scarcity, a major standout in an enclave that is largely high-rise public housing, food centres and malls. Tourists and visitors are constantly lured by the F&B options that pepper the streets of Race Course Road, Buffalo Lane, Dunlop Street, Dalhousie Lane.

These two locations present tremendous opportunities for investors looking at more manageable quantum; savvy retail investors seeking to diversify their portfolios; and family-owned businesses who want to park their funds in a safe haven gateway city such as Singapore.

Districts 1 and 2 will, of course, always command a premium for their location in the heart of the Grade-A commercial district, but there is certainly a lot of value to be unlocked in Kampong Glam and Little India. Moreover, the versatile, concept-driven asset has proven to be resilient against micro and macro externalities, including the tough credit controls imposed by the authorities and the financial crisis.