The market saw just 19 caveated shophouse transactions totaling $100m, a 43% drop in transaction value QoQ.

Singapore's shophouse investment market slowed sharply in the first quarter of 2025 as rising trade tensions and economic uncertainty weighed on buyer sentiment.

According to PropNex's latest research report, the market saw just 19 caveated shophouse transactions totaling $100m, a 43% drop in transaction value from the previous quarter.

"The pullback in shophouse sales volume and value is likely due to a combination of factors, including geopolitical tensions, concerns about trade tariffs impact, and a mismatch in pricing expectations," the report noted, adding that "investors are likely more cautious, amid macroeconomic uncertainties."

Sales volume also fell 21% QoQ, and 17% YoY, marking one of the weakest quarters in recent years for the tightly held shophouse segment. Still, demand for freehold and 999-year leasehold properties remained dominant, making up 90% of all sales.

Despite the overall slowdown, shophouse hotels are drawing interest. PropNex highlighted that the 21 Carpenter boutique hotel is being acquired for about $100m, translating to nearly $2.08 million per key, one of the highest unit prices on record.

Meanwhile, the Duxton Reserve Singapore was reportedly sold for $80m, and the 138-room Hotel 1900 near Chinatown is on the market with a guide price of $170m.

"Notwithstanding near-term uncertainties, shophouse hospitality assets remain attractive as Singapore's tourism sector is poised for another year of growth in 2025," the report said.

Shophouse leasing activity held up, with 836 rental contracts signed worth $9.1m, although this was 4.0% fewer contracts than in Q4 2024. Rents nudged up 0.3% QoQ to a median of $6.47 psf/month.

Still, performance varied by district. District 15 (Katong, Joo Chiat) saw the biggest increase at +12.2%, whilst District 8 (Little India) posted a -9.2% decline.

"High overhead costs paired with cautious consumer spending is expected to put pressure on Singapore retailers and F&B operators," PropNex warned. "This may curtail their willingness to pay higher rents when renewals are up."

PropNex expects continued caution in the quarters ahead as trade war fears loom large. The report pointed to sweeping new US tariffs and rising US-China tensions as likely to keep both buyers and occupiers on edge.

"An all-out trade war or prolonged periods of uncertainty and volatility will likely affect investment appetite, particularly for big-ticket purchases," it stated. "It is possible that shophouse transactions could be relatively muted in the coming quarters, as buyers and sellers watch and wait."

Yet, in an uncertain landscape, shophouses may still appeal to long-term investors.

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

PropNex remains bullish on Singapore's fundamentals, citing its "stable political environment, business-friendly policies, strong currency, excellent connectivity, and infrastructure."