This media feature first appeared on CNA Open House Radio Show on 5 April 2025.
Listen to the full interview here.
Description:
Thinking of investing in commercial property in Singapore? In this interview with CNA Open House Radio Show, PropertyBank’s Executive Director Edith Tay shares what every investor should know — from financing rules and GST costs to tenant risks, URA zoning, and asset types. Whether you’re eyeing office space, retail units, or industrial properties, this is a practical guide to making informed, strategic property decisions.
Transcript:
Susan: Thank you for staying with us here on Open House! I am Susan Ng, together with Felicia Tan, from 99.co. We’re heading off into a conversation where we are talking about the purchase of commercial property. Before we even look at listings, what would be the first thing to think about? We’ll also discuss what you need to know when you invest in commercial properties.
If you want to talk to us or send us your WhatsApp message, you can WhatsApp to us at 9631 1938. Joining us for our conversation now is Edith Tay. Edith is Executive Director of PropertyBank Private Limited. Edith, thank you very much for making time.
Edith: Thank you Susan for having me.
Susan: Alright, so Edith, for people who are considering taking the plunge into commercial properties, what would be the first thing they absolutely must think about even before they begin looking at listings?
Edith: So, we have the 3C framework, but I think the first C being clarity, so that’s the purpose. So understand why you are buying. Are you buying for rental income, or are you buying for your own business use, or are you buying to have your capital gains? So this will give clarity before you plunge to start searching.
Felicia: Are there specific types of commercial properties such as office spaces versus retail units versus industrial buildings, that have been more attractive to investors, or they carry different risks for new investors?
Edith: Definitely, Felicia. So when we talk about commercial properties, right, so these are the three sectors. Rightfully speaking, they are all called non-residential. So it is not “one size that fits all”, and each of the characteristics and the risks is different.
So in terms of office, it’s generally stable, but requires very careful tenant profiling, because these days you know that tenants can have the option to work from home or they can go co-working. So this is one of the risks, it’s about your careful selection in terms of the tenant profiling.
And for retail, because the entry price per square foot can be the highest, and many of the strata malls may not be managed very well. However you may feel the excitement to be a shop owner, you know, owning a shop is like everybody’s childhood dream, you know, but the high turnover of tenants because the moment that the business cannot make it, retail tenants basically are very, very quick to leave the retail space. It’s like pack and go.
Industrial, it seems to be less risk in terms of the per square foot because the entry is lower quantum. However, because of the very short lease nature, unless you want to afford a freehold industrial property, then I would say that, you know, don’t be the person holding the hot potato as the lease comes down lower. And banks are a way to finance these short lease properties.
Susan: You know, Edith, usually when it comes to real estate, we’re always told that location, location, location. So that becomes very important. But for commercial properties, is it more than just location?
Is it more than just being in a central space? What could be some of the specific location factors that can really make or break a commercial investment?
Edith: Okay, again, when we mention this word of “commercial”, it’s like office, but there is a marked difference between the commercial, which comprises of office and shops and the industrial (properties).
So for commercial, which is office and industrial. Beyond the accessibility, you know, the location itself, sometimes because it’s not fully sheltered, office tenants are rather picky. And of course, beyond the accessibility is the age of building, the maintenance, the road works, you know, when you have the best location, but there are road works, so that may also make it less tenantable.
For industrial, it all depends on the trade. So when we say central, it may not be central, like all of us, you know, can access from MRT. But the trade itself, like for the food factories, for example, need not to be the best, like so accessible from MRT because it is made for that purpose. For example, the North Coast Innovation Corridor, there’s new infrastructure development. I think that makes a marked difference to the location, so location is not again one-size-fits-all.
Felicia: Yeah, it’s also easy, you know, to focus on the purchase price, you know, when we want to purchase anything, right, including properties. But what are some of the often overlooked costs that new commercial investors in Singapore need to consider that they have to factor into their budget as well?
Edith: Well so just now I mentioned 3C right, second C is like, you know, the capital. You know how much you have so that naturally brings me to the financial planning part. And I think as new investors looking at non-residential, I think a lot of them are so used to like thinking of (whether they are) able to loan very easily, but in fact the down payment itself for example, cannot be serviced by CPF. So this is one of those factors for the residential investors transiting into non-residential.
And on top of that, I would say that just as a ballpark, about 75% or more of the commercial industrial properties may have the GST component, because some are already owned by GST entities. So that means to say that while you can say you set up a GST company to claim back the GST, the GST has to be upfront payment at the point of purchase, before you can claim back. So cash flow definitely has to include consideration of the GST and buyer stamp duty. So like both residential and non-residential, I think the buyer stamp duty is something which is obvious. Because of the sum involved, the amount can be quite a lot. And lastly, on a recurring basis, do be mindful about the vacancy period, because if it is not rented out, you can’t stay in it.
Susan: Okay, alright, so many, many things to consider, of course. Here’s one of those things that perhaps would be a little bit of a headache, and that is tenants. So if you buy commercial property, Edith, you mentioned tenants, some, they can just pack up and go. So when we’re looking at investment in commercial property, you also want to have healthy demand from tenants. What’s it like now? What’s the current tenant demand like across the different commercial sectors in Singapore? Is there a way we can gauge the potential when looking for tenants?
Edith: Well, you can go to 99.co. Okay, not so much to track on the tenants, because that will not show up, but basically on transactions. I think there’s a way to look into it.
So for office, it’s definitely stabilising and I think one thing is that the major buildings that’s owned by the office landlords are actually at the mark of 90% and above. And for the strata units they’re obviously very different group of tenants looking at it. So if you ask me about the current demand I can see that office is definitely stabilising, and we’ve also those from major landlords buildings, plus those out from co-working space, they’re also looking at you know affordable office units.
And for retail it is interesting to see that there are more Chinese brands coming into Singapore. And these Chinese brands actually make very, very fast decision. So I think that’s a piece of good news for retail. But however, retail, again, you have to be very, very picky because some buildings are just not properly managed. So, you know, you can know that, if you don’t have a road funding unit, you probably cannot rent it out because internally it’s difficult.
And for industrial, it remains healthy. What I want to highlight is about the AI (sector). Right now, I think AI is part of life today, daily, and AI does drive demand. And food factories itself also, because we can’t go without food. So with AI driving demand, there are two segments of it, the tech startups, and also plus the fact that the so-called newer wave of entrepreneurs, they will prefer to be at industrial buildings. So one of the key highlights, I will say that, first, it’s not just about statistics, it’s about walking the building and feeling the occupancy, looking at the directory. So I think as an investor, it’s not easy for you to like, hey, I’m just going to do it, walk the site and all that. There must be like some targets to follow through and well, best to talk to people like us who walk the streets every day.
Felicia: I see. Okay, so let’s talk about the legal side of things. You know, are there any unique regulations or common pitfalls on the legal aspect that first time commercial property investors in Singapore should be particularly aware of?
Edith: Okay, so commercial or industrial is unlike residential. I mean, basically most of these buildings are already developed. And you know that you only buy for residential use. The zoning itself is what industrial basically can be a bit confusing. Because for the industrial buildings it may look like office facade, modern glass, but actually the zoning itself you cannot read on the streets. You have to check from master plan, so underlying zoning, for example, you know we do have inquiries from like tuition centers sometimes their budget is on the low side and they tend to do self search. And they end up asking whether industrial buildings can be used for tuition. It is definitely a no-no, and in fact there are penalties for URA to look into illegal use of the premises. And also the other part of it is, besides the regulation, would be the common pitfalls like banks will not finance very short leases. That means to say that you may have to end up basically using your own cash.
Susan: At the end of the day, we must also remember that there are taxes to pay, isn’t it, Edith? How are commercial properties taxed in Singapore?
Edith: Well, taxes, taxes. Okay, I like to contribute to the nation. So I think for non-residential properties, well, there’s the annual property tax and that’s based off annual assessment. So it’s not easy to actually understand, but as a guide, annual assessment means how much rentability in terms of like how much based on market the rent can be. There is also no occupier rates. That means to say that even today, if I buy for my own use, I still have to pay the annual property tax. So as a gauge, usually we will do something that is like a search with the government websites to understand about the annual assessment.
The other part is the income tax. So income tax itself, again, depends on whether you hold it under your personal name or is it under an entity. Personal tax rates are usually higher than corporate tax rates in Singapore for the high income brackets. So you then, of course, will make a decision whether you hold the non-residential property under a corporate entity. So there’s a fair bit of tax planning for this.
Felicia: Right. Okay. So financing of commercial property is a different ball game as compared to a residential one, right? So what are some of the key financing options available and what kind of financial profile might banks or lenders be looking for?
Edith: Well, in fact, for this particular question, right, it can be a half an hour session. I’m just going to condense it. So for us, we actually try to put side by side the residential versus the non-residential so that consumers or buyers can actually understand what’s the key difference between, you know, the different ball game itself.
So for residential, we talk about a typical scenario. In fact, you can borrow up to 65 (years old), whereas for non-residential, you can borrow up to age of 75, okay? But it again depends on whether you are buying that piece of property under your personal name or is it under an entity. If it is under an entity, banks normally prefer operating companies. That means companies that have been operating for quite a few years. However, since from the investor’s point of view, they will just say, okay, I want to buy this property. I set up a company to buy it and there’s no track records for the bank. We call this like investment holding companies and the effect of it is that banks would become more stringent.
So going back to so called the age itself, right, the one thing that you notice is that because even though non-residential bank borrowing is higher in terms of interest rates, but because of the ability to stretch until 75 for the shareholders, the directors right, you have this, you know, good news about investing in commercial industrial properties, assuming you are way below 50 years. You can really stretch and there’s a marked difference on the monthly instalment, which means to say that more oftentimes than not, you probably have a non-residential property that you can fully pay off by the tenant for your monthly mortgage.
Susan: What about if you’re a landlord of a commercial property, you will have responsibilities, yeah, to the building, to the tenants. What are some of these key responsibilities? I mean, should a landlord be doing everything on his or her own? And when would it be wise to consider hiring a property manager even to manage the property?
Edith: I love this question. So this is what I’d say, generally speaking, most people will think that there’s a lot of responsibility from the part of the landlord. So typically if you rent to a business, they will solve their own problems and make sure the business keeps running. Usually you’ll get less queries or requests from the (tenants) to say look at my choked toilets. They will solve their own problems. And things like even for the aircon itself, the electrical bills, all these is quite similar, like residential, they pay their own bills. So I would say that unless you are landlord of a building, if you are landlord of units, more likely than not, the tenants also have to buy their own content insurance, you buy the fire insurance, so the responsibility is actually more limited if you are looking at non-residential properties. And you probably not likely to have termite problem. Usually for industrial, it will be handed to the tenant on the bare basis or they take over from the outgoing tenant. That means to say that actually landlord itself has a very little so called management in this.
However, it is important to hire a hiring manager for two things. One is that you probably over time own quite a number of units. That is a time to hire one. And then the other thing about hiring a property manager is to make sure that you preserve the property value. You also have a third party with you in terms of the check in and check out of the tenants to make sure that you know, you have proper records of the floor plans and you make sure that these are already pre-approved by the building, the MCST rather, for strata title. Preserving the value is one, and also having a partner like you know that you can tap on the expertise to interface between you and the tenant, which is a business tenant.
Felicia: So you know due diligence is definitely crucial in any investment, right? So what are some of the few non-negotiable checks that buyers should conduct before signing on the dotted line for a commercial property?
Edith: Okay, so most of it if the buyers have an agent to help, that part will be handled. Like for example, the ownership check. So how on earth do you know whether that party owns that particular unit, or is that party actually a tenant just leasing one of the units? So ownership check is non-negotiable. There is, of course, you know, online that you can buy via INLIS for the ownership check. And the physical inspection for the defects and even down to unauthorised works.
So for example, I was involved in you know the in between of the purchase and I think single out this thing, whether mezzanine, especially, you know it looks cool, (but) is it authorised? And more oftentimes than not, unless the structure is built with mezzanine, some of the tenants, while leasing the space, extend the mezzanine without even informing the landlords. So when the landlords sell this property, that whether you know, it’s being represented or not, the buyer itself has to then check whether this is authorised. If not, it is always good to have in the contract that any unauthorised structures have to be removed.
And the next thing, of course, I have already highlighted earlier, which is the URA zoning for the rightful use. So like, for example, you know, religious organisations, renting industrial premises, this is now not exactly the rightful use. Okay, so tenancy, you know, the details in the tenancy contracts like, for example, when you buy over, can you then change the tenant because the tenant has you know, paid lower rent for many years already. But however, things like rental cap – so the the details – the devil is in the details, even down to the tenancy contracts.
Susan: Okay, so lots of things to think about, Edith, before we actually even look at listings for commercial property and intending to invest. And that’s all the time we have today, Edith. Thank you very much for your insights into commercial properties and all the dos and don’ts when deciding on investment here. Thanks very much, Edith.
Edith: My pleasure, Susan and Felicia, I think it’s not a one-size-fits-all.
Susan: Absolutely, absolutely not. Edith Tay is Executive Director of PropertyBank Private Limited, and that’s it for Open House. Property news and reviews on www.99.co. If you’ve missed an episode, and you want to listen again, Open House podcasts are available on the melisten app. I’m Susan Ng, together with Felicia Tan from 99.co. Thank you very much for joining us today.
