Finding the Perfect Property: Commercial vs. Residential Shophouses

Singapore’s shophouses are a unique and highly sought-after asset class, but not all shophouses are the same. Many buyers don’t realize that these heritage-rich properties can be commercial, residential, or even mixed-use. Each shophouse has its own investment potential, financing considerations, and regulations.

So, if you’re looking to buy a shophouse, which type should you choose? Let’s break down the key differences to help you make the right investment decision.

Zoning & Usage: What Can You Do With the Property?

Zoning regulations determine how a shophouse can be used.

The biggest difference between commercial and residential shophouses lies in their zoning regulations, which determine how the property can be used.

Commercial shophouses are typically used for business purposes, such as retail shops, F&B outlets, offices, or boutique hotels. These properties are often located in bustling districts like Telok Ayer, Tanjong Pagar, and Boat Quay, where businesses thrive.

Residential shophouses, on the other hand, are meant for private living and cannot be leased out for commercial activities unless specified. They are often found in quieter neighborhoods and conservation areas such as Joo Chiat, Tiong Bahru and Emerald Hill

Mixed-use shophouses offer the best of both worlds as they allow businesses to operate on the ground floor while maintaining residential units on the upper levels. Keong Saik Road is a prime example of mixed-use shophouses, where trendy restaurants, cafés, and boutique hotels operate on the ground floor, while residential units or offices occupy the upper levels. This blend of heritage charm and modern vibrancy makes it a sought-after location.

If you plan to run a business or lease to commercial tenants, a commercial shophouse is the ideal choice But if you’re seeking a heritage home with lasting value, a residential shophouse may be more suitable.

Rental Income & Investment Potential

The type of shophouse chosen depends on the buyer’s needs.

Investors looking for higher rental yields typically lean toward commercial shophouses, as businesses — especially F&B operators, corporate offices, and lifestyle brands — pay premium  rents in prime locations. Strong tenant demand further drives their investment appeal.

However, residential shophouses appeal to owner-occupiers and boutique landlords who value stability and long-term appreciation. Properties in conservation areas, where supply is limited, tend to hold and grow their value over time.

If you’re looking for strong rental returns, go for commercial shophouses. But if you’re after a  unique living space or a long-term appreciation play, a residential shophouse may be the better fit. 

Financing & Ownership Restrictions

Be mindful of restrictions imposed on shophouse ownership.

Buyer restriction

Foreigners cannot buy residential shophouses unless they obtain special approval from the authorities. Commercial shophouses have no such restrictions, making them a popular choice for overseas investors.

Taxes and duties

Buying a residential shophouse means you’ll have to pay Additional Buyer’s Stamp Duty (ABSD), which can be hefty if you already own multiple properties.

Commercial shophouses are exempt from ABSD, making them more attractive to investors looking to diversify their portfolios.

If you’re a foreigner or investor looking to avoid ownership restrictions and ABSD, a commercial shophouse is the better option.

Other Considerations: What’s Your End Goal?

Beyond numbers and regulations, your decision should align with your investment goals:

• If you’re an investor, commercial shophouses may offer better rental returns and fewer ownership restrictions.

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• If you’re looking for a unique home, a residential shophouse provides a rare heritage-living experience.

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• If you want flexibility, a mixed-use shophouse allows you to enjoy both commercial and residential benefits.

There’s no one-size-fits-all answer as it depends on your financial goals, risk appetite, and long-term plans. Commercial shophouses are great for high rental yields and investment potential, while residential shophouses appeal to those looking for heritage homes or stable appreciation.

Still unsure? Explore our latest listings or get in touch with the PSE team to find the right shophouse for you!