How to Buy Commercial Property in Singapore: The Complete 2025 Guide

Investing in commercial property in Singapore can be a highly lucrative way to diversify your portfolio and build long-term wealth. Known for its strong economy, political stability, and business-friendly regulations, Singapore offers investors opportunities across offices, retail, industrial spaces, hotels, and more. However, buying commercial property requires careful planning, adherence to local regulations, and understanding key financial and legal considerations.

This guide provides a step-by-step overview for both local and foreign investors, highlighting types of commercial property, eligibility rules, the buying process, financial implications, and practical tips.

1. Understanding Commercial Property in Singapore

Definition

Commercial property refers to real estate primarily used for business or investment purposes rather than residential living. In Singapore, land and properties are zoned into categories such as residential, commercial, industrial, and mixed-use, with specific regulations governing ownership, development, and usage.

Key Insight: Mixed-use properties—combining commercial and residential functions—are typically treated as residential for legal purposes. Foreign buyers need government approval before purchasing these, due to stricter foreign ownership rules for residential property.

2. Types of Commercial Property in Singapore

Commercial properties can be broadly classified into the following categories:

Example Scenarios:

1. Investor Perspective: A foreign investor buys a retail shop in Orchard Road to earn rental income from a high-footfall location.

2. Business Owner: A Singaporean entrepreneur acquires a B1 industrial unit for a light manufacturing startup.

3. Mixed Use Challenge: A foreign buyer interested in a shophouse with residential space above must secure government approval.

3. Where to Find Commercial Property

Before investing, research the market using:

• Property portals and online listings

• Real estate agencies specializing in commercial property

• Government databases for zoning and property classifications

Tip: Track property trends over time to identify areas with strong growth potential and rental yields.

4. Eligibility & Legal Requirements for Foreigners

Foreigners can generally purchase the following commercial properties without special approval:

• Shophouses approved for commercial use

• Hotels and hostels

• Industrial and commercial properties

Important Notes:

• Mixed-use sites are usually considered residential; foreign buyers must obtain approval from the Singapore Land Authority (SLA).

• Always verify property zoning with the Urban Redevelopment Authority (URA) and seek legal guidance before purchase.

5. Step-by-Step Buying Process

Buying commercial property involves multiple steps that require financial planning, legal diligence, and market research.

Step 1: Define Your Investment Goals

• Are you buying for business operations or rental income?

• Determine whether the property is a long-term investment or a short-term opportunity.

Step 2: Assess Your Financial Situation

• Loan-to-Value (LTV) Ratio: Banks typically finance up to 80% for commercial property, requiring significant cash outlay.

• Debt Servicing: Demonstrate the ability to service the loan without compromising financial stability.

• Non-CPF Funding: CPF funds cannot be used for commercial property purchases.

Step 3: Engage Professionals

• Hire a licensed commercial real estate agent for property search and negotiation.

• Engage a conveyancing lawyer to handle due diligence, documentation, and legal checks.

Step 4: Search and Shortlist Properties

• Review market trends and rental yields.

• Check zoning, permissible uses, and potential for capital appreciation.

• Consider foot traffic, accessibility, and surrounding amenities.

Step 5: Make an Offer and Secure an Option to Purchase (OTP)

• Pay a non-refundable option fee (usually 1% of purchase price).

• Option period typically lasts 14 days for financing and due diligence.

Step 6: Conduct Due Diligence

• Legal searches for title, ownership, and encumbrances.

• Survey the property to assess maintenance, structural integrity, and compliance.

Step 7: Exercise the Option and Pay Stamp Duties

• Pay remaining deposit (usually 4% of purchase price).

• Buyer’s Stamp Duty (BSD): Calculated on a progressive scale based on property price.

• Goods & Services Tax (GST): Currently 9% for commercial property, payable on completion.

Step 8: Completion

• Final payment and property transfer occur on the completion date, typically 8–12 weeks after exercising OTP.

6. Taxes and Fees to Consider

Tip: Always budget for legal fees, agent commissions, renovation, and maintenance costs in addition to taxes.

7. Pros and Cons of Commercial Property Investment

Key Takeaway: Commercial property can offer attractive returns and flexibility for business use, but involves higher upfront costs and legal complexity.

8. Practical Tips for Investors

• Diversify Locations: Don’t concentrate all investments in one district.

• Check Zoning Regulations: Ensure intended use aligns with URA zoning.

• Professional Assistance: Use lawyers, surveyors, and agents to avoid costly mistakes.

• Plan Cash Flow: Consider taxes, mortgage payments, maintenance, and potential vacancies.

• Compare Yields: Evaluate rental income vs. purchase costs across multiple properties.

ROI and rental yields

Key Insights from the Chart:

1. Retail and industrial properties tend to offer higher rental yields, particularly in suburban areas where purchase prices are lower.

2. Hotels and premium CBD offices provide strong long-term ROI but require substantial upfront investment.

3. Shophouses are scarce and appealing for prestige investors but come with regulatory and maintenance challenges.

4. Medical suites offer stable, long-term rental tenants but modest capital growth potential.

Comparison of Rental Yield vs Capital Appreciation Potential

Example Investment Scenarios

1. Scenario 1: Cashflow-Focused Investor

   • Buys a suburban B1 industrial unit for SGD 2M, rents it out for SGD 120k/year.

   • Rental Yield: 6%; Appreciation Potential: Moderate.

   • Ideal for steady monthly income and low risk.

2. Scenario 2: Long-Term Wealth Builder

   • Buys a heritage shophouse for SGD 5M in Chinatown.

   • Rental Yield: 4%; Appreciation Potential: Very High.

   • Value grows significantly over 10–15 years due to scarcity and heritage appeal.

3. Scenario 3: Balanced Approach

   • Buys a CBD office unit for SGD 10M.

   • Rental Yield: 4.5%; Appreciation Potential: High.

   • Generates moderate income while benefiting from long-term appreciation in prime districts.

Key Takeaways

• Singapore is a prime location for commercial property investment due to a strong economy and foreign investor incentives.

• Foreigners can buy certain commercial properties without government approval, but mixed-use sites require permission.

• Upfront costs are higher than residential property, but ABSD exemption and potential rental yields make commercial property attractive.

• Step-by-step planning, professional guidance, and diligent research are crucial to a successful purchase.

Algene Toh

Senior Real Estate Salesperson

Asset Investment Brokers Pte Ltd

Email: admin@bsr2.com

Phone: +65 9008 8002

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