Singapore has one of the most expensive office markets in the world due to its competitiveness as a financial hub globally. The ease of doing business here is incomparable to other regional countries.
Nowadays, multinationals and foreign investors don’t only have to deal with obscurely high real estate prices in prime areas, but also newly imposed real estate taxes.
I will touch more upon this later in this article. Today, we review how you can invest in office space and buildings in Singapore and what you must pay attention to.
Topics covered:
- Can foreigners buy office space in Singapore?
- Singapore’s Office Market
- Areas to Invest in Office Space
- Taxes
- How can I find office space for sale in Singapore?
Can foreigners buy office space in Singapore?
Foreigners have no issues to invest in office space in Singapore, might it be a single unit or building. Other types of commercial properties that are available to foreigners include hotels, shop houses, warehouses, factories, and shopping malls.
The residential real estate market is more regulated in Singapore compared to the commercial as a measure to protect local house buyers.
As shown on the Singaporean Land Authority (SLA) website, examples of property types that foreign buyers have to seek approval before purchase include:
- Vacant residential land
- Terrace house
- Semi-detached house
- Bungalow/detached house
- Shophouse (for non-commercial use)
It’s reviewed case-by-base and you sometimes either have to be a permanent resident (PR) and/or put up a significant amount of money to be able to get hold of the unit.
As a result, some foreigners decide to collaborate with a local partner / set up a local company.
Property types that foreigners don’t need approval for include:
- Condominium units
- Flat units
- Strata landed houses in approved condominium developments
- Shophouses (for commercial use)
- Industrial and commercial properties
- Hotels (registered under the provisions of the Hotels Act)
- Executive condominiums
- Leasehold estates in landed residential property (not exceeding 7 years)
For more information, I recommend you check SLA’s website. There you can also find a link to the Residential Act of Singapore that goes into further details about what regulations apply.
Singapore’s Office Market
Singapore’s office market was hit during the COVID-19 pandemic and investment sentiments sank at the same time as employees adopted working from home.
Worth mentioning is also that developing Asian countries are predicted to see stronger growth compared to developed markets, like South Korea and Singapore.
With that said, vacancy rates have remained comparably low in Singapore and CBRE claims that the average vacancy rate hovered at 5%. An obvious trend is that co-working and remote working is picking up, with more operators entering the market.
More Flexibility and Shortened Lease Terms Expected
There are around 120 co-working offices available in Singapore and the market grew as much as 53% from 2016 to 2017, which speaks for itself.
More flexible lease terms and reduced rents might be needed to attract new tenants, according to Knight Frank. This will also result in expectations of shorter lease terms and adjustment of office sizes, as business growth will remain uncertain.
The COVID-19 pandemic has also pointed to a greater need for more mixed-use developments in the central business district.
This could accelerate the conversions of office space into mixed-use developments that are becoming increasingly important according to leading real estate companies.
Colliers reports that the new Grade A office supply in the central business district will remain low at around 3.0% from 2020 – 2025. Compare that to the supply from 2010 to 2020 which was 6.2% on average.
Areas to Invest in Office Space
A majority of the office space is concentrated in the central business district and the surrounding areas. Below I’ve listed the most popular areas for office space leases, but also a couple of upcoming areas.
Marina Bay
Marina Bay is the most prominent commercial area in Singapore where you can find a handful of Grade A office buildings:
- Marina Bay Financial Centre
- One Raffles Quay
- Asia Square Towers
- Marina One Office Towers
Marina Bay tops the list with the most expensive rentals and with rates that are around 30% more expensive compared to Raffles Place, for example.
Most of the Grade A offices in Marina Bay are located just a 2-minute walk from the Downtown MRT or Raffles Place MRT. Indeed, this is the most sought-after area and with the biggest concentration of multinational banks.
Raffles Place
Raffles Place is on par with Marina Bay and the third-most expensive area in Singapore. WeWork has an office in Raffles Place and where private offices with room for 6 persons start from almost SGD 7,000 per month.
Raffles Place is claimed to be the equivalent of Wall Street of New York and you can find many banks, insurance companies, recruitment firms, and more here.
The area was initially planned and developed in the 1820s, serving as a commercial area. It was later renamed Raffles Place in 1858 and undoubtedly one of the most renowned areas of Singapore.
Three of the tallest buildings that stretch 280 meters include Republic Plaza, UOB Plaza One, and One Raffles Place.
Shenton Way
Shenton Way is a long road that is surrounded by tall skyscrapers on both sides.
Shenton Way has some of the highest lease rates in Singapore and places itself in the top five. Fees are slightly lower compared to Raffles Place and on par with Robinson Road. Examples of buildings located along Shenton Way include:
- One Shenton Way
- AXA Tower (also known as 8 Shenton Way)
- SGX Centre
- OUE Downtown (formerly DBS Building)
- Singapore Conference Hall
- MAS Building
- Shenton House
- Eon Shenton
- 76 Shenton Way
- 78 Shenton Way
- V on Shenton
- Hock Teck See
Cecil Street
Cecil Street is the home of many commercial buildings and rates aren’t as high compared to the above-mentioned areas. With that said, Cecil Street remains one of the most popular areas for corporations.
Rates are slightly lower than Shenton Way and Robinson Road, but still in the upper segment.
Examples of buildings located here include Tong Eng Building, Prudential Tower, Fraser Tower, and Bangkok Bank Building.
Tanjong Pagar
Tanjong Pagar is one of the oldest districts in Singapore and famous for its colorful lowrise buildings. Many Indians and Chinese dock workers decided to settle here from the mid 19th century and the area dates back to the 16th century.
Rental fees are slightly lower in Tanjong Pagar and about half of that in Marina Bay.
Notable buildings are sub-areas here include Little Korea, AIA Tanjong Pagar, and The Tanjong Pagar railway station. It is located a stones-throw away from the CBD and one of the most popular visually astonishing areas.
Taxes
Office space and buildings often fetch hundreds of millions of US dollars. Thus, one of the first things you should do before even searching for real estate is to understand your tax obligation.
Below I have included that you have to pay when buying and selling office space and buildings in Singapore.
Buyer’s Stamp Duty
Investing in commercial real estate like office space can be preferable as you’re exempt from the Additional Buyer’s Stamp Duty (ABSD). This duty can be charged when foreigners buy residential real estate and range between 5% to 25%.
With that said, you still have to pay the Buyer’s Stamp Duty (BSD). The rate decreases progressively, depending on how long you hold the property:
- 1% of the first SGD 180.000
- 2% of the second SGD 180.000
- 3% of the remaining value
Goods and Services Tax (GST)
The lease and sale of residential properties are not subject to GST in Singapore, but that’s not the case for non-residential property, like office space.
The GST is 7% of the moment I‘m writing this article and has to be paid in addition to the Buyer’s Stamp Duty explained above.
Annual Property Tax
An Annual Property Tax of 10% is charged and multiplied by the yearly estimated rental incomes. This is something you can read more about on the Inland Revenue Authority’s website.
Capital Gains Tax
Capital gains tax is normally not charged for residential or commercial property in Singapore.
But, the authorities might charge the tax if you have a pure and obvious profit-seeking incentive.
How can I find office space for sale in Singapore?
As explained in separate articles, you have a few options when scouting commercial real estate in Asia. Your first option is to check listings online. This can be time-consuming and you’ll often come across listings that are either outdated or lack necessary information.
Besides, if you’re a foreign investor with limited knowledge about local buying regulations, you have to get your feet wet first. I’ve provided the basics above, but you should also consult with a local partner.
A second option when looking for office space is to work with a reliable and experienced partner that presents a handful of objects at once. He or she can also teach you more about local buying regulations and how you can potentially reduce your tax burden, for example.
Asia Property HQ works with credible partners that have years of experience in Singapore’s commercial real estate market. Simply fill out the form below to get in touch with a partner instantly.
