The shophouse market was once one of the most popular choices in the commercial property space. But somewhere along the lines, its transactions started to slow down. In fact, it hit a record low within the past decade. Interestingly enough, analysts seem to think that the market could possibly rebound in 2026. So let's take a closer look at what might happen for shophouses in the year ahead.

With just 70 transactions totalling about $516 million, landed shophouse transactions hit a 10-year low in 2025, a stark difference from the peak of 245 shophouses worth $1.8 billion in 2021.

Figures based on caveated deals; some transactions may be excluded

This may make it seem like 2025 was a bad year for shophouses, but the slowdown was actually not uniform. For example, conservation shophouses are still tightly held due to their rarity and long-term value.

Furthermore, most transactions in 2H2025 were concentrated in the $5-10 million range. That tells us that transaction activity didn't vanish, but rather gravitated towards the lower entry range, where pricing expectations between buyers and sellers were better aligned.

As a case in point, our latest shophouse market report shows that District 8 (Little India) recorded 24 shophouse transactions worth about $183 million in 2025, accounting for more than a quarter of the year's total sales value. With comparatively lower entry prices than prime CBD districts and consistently strong footfall supporting tenant demand, the area became a natural draw for first-time investors seeking a more accessible foothold without sacrificing rental resilience.

Freehold and 999-year shophouses also proved more resilient. These longer tenures seem to attract strong interest, reflecting how many investors prioritise durability and capital preservation when conditions are less buoyant.

It's also worthwhile to note that transaction data alone doesn't tell the full story. Some deals are structured through share transfers or special purpose vehicles, which may not always show up in conventional caveat records. In a niche asset class like shophouses, that distinction might matter more than you think.

All things considered, leasing is a whole nother issue.

Leasing conditions have also softened, pressured by a guarded consumer environment, especially in the F&B sector, which are traditionally the backbone of many shophouse clusters. Those affected have had to contend with intense competition, manpower shortages, and more cautious spending. So it's no wonder that 4Q2025 was one of the weakest quarters in around five years for shophouse leasing activity.

Despite that, locations with steady footfall, strong residential catchments, or proximity to MRT stations have continued to see leasing activity, but also higher rents. In many cases, landlords who were willing to be flexible on rent or lease terms managed to secure tenants faster, while those who are more rigid may experience longer vacancy periods.

It is also important to understand that shophouses are not typically bought for high rental yields. Most shophouses have a rental yield of around 2% to 3%, depending on entry price and tenant profile. Many buyers are comfortable with this because the appeal lies more in long-term capital preservation and land scarcity rather than immediate income.

Beyond transaction counts, 2025 was also shaped by capital market dynamics. While commercial properties are not subject to Additional Buyer's Stamp Duty (ABSD), the broader cooling environment - particularly the 60% ABSD rate on foreign residential buyers - dampened overall liquidity and cross-asset sentiment. Investors became more cautious across the board, even in segments technically unaffected by ABSD. At the same time, elevated borrowing costs increased refinancing spreads, meaning some owners faced higher holding costs than during the ultra-low rate environment of 2021-2022. Upper-floor office space within shophouses also felt the lingering effects of hybrid work arrangements, especially as new office supply entered the market. Meanwhile, family offices - a group that was particularly active during the post-pandemic surge - have been more selective in capital deployment, recycling funds into diversified strategies rather than concentrating in heritage commercial assets. Together, these factors created a liquidity slowdown driven less by structural weakness and more by capital discipline.

2025 was less about weakening fundamentals and more about recalibration, which means:

1. New audience
   More first-time investors are drawn to the shophouse market, especially those with lower entry price points like in Little India. Many of them compare buying a $5-10 million shophouse with buying residential properties, which, unlike shophouses, are subject to additional buyer's stamp duty (ABSD). As a result, investors are assessing whether or not these lower entry commercial units give more bang for their buck.

For context, ABSD rates on residential properties for Singaporean citizens are up to 30% of the property price/value. For permanent residents, it's up to 35%. And for foreigners, it's 60%.

2. Buyers are more selective
   Investors seem more focused on assets with strong location fundamentals, freehold or longer tenure, and clear income prospects.
3. Mismatched pricing expectations
   Asking prices haven't always aligned with what investors are willing to pay. At the same time, owners with holding power may understandably be reluctant to agree on a lower price. If there is no immediate pressure to divest, they may choose to wait rather than accept offers that don't reflect their long-term view of the asset's value.
4. Leasing can still be challenging
   As mentioned earlier, leasing has already softened. The issue now isn't just filling space, but sustaining rents at levels tenants can realistically support. Vacancy risk is more pronounced in this climate. A few months without receiving rent may impact annual returns, which is why some landlords would rather secure a reliable tenant rather than hold out in hopes for higher rent.

Scenario 1: Rebound

A rebound could happen if stabilising forces come together. For example, if interest rates continue to ease or at least hold steady, the cost of capital becomes more manageable, which naturally improves affordability. At the same time, if sellers start adjusting price expectations closer to where buyers are willing to pay today, the bid-ask gap could narrow. In addition, if 2026 sees a healthier tourism flow, retail and hospitality tenants that occupy many shophouses may receive more support.

Altogether, they make good conditions for recovery, though realistically speaking, the bounce back wouldn't reach 2021 levels. But, it is possible to see transaction volumes inch up from what we saw in 2025.

Scenario 2: Extended standoff

An extended standoff could happen if global conditions remain tight and confidence stays fragile. As a result, investors may continue to act cautiously. At the same time, sellers with strong holding power may see little reason to adjust prices, especially for rare or well-located assets.

In this case, transaction volumes may look similar to 2025: steady but subdued. Pricing could continue to diverge: heritage shophouses in established high-footfall nodes holding firm, while secondary locations face softer negotiations.

In short, the market wouldn't weaken dramatically, but it wouldn't accelerate either. Instead, it could remain muted.

Scenario 3: Continued softening

A more cautious outcome is that the market continues to soften into 2026. This could happen if the economy becomes so much more uncertain and interest rates stay elevated or even rise, which could dampen investor confidence. At the same time, if leasing conditions remain uneven, buyers may act conservatively, placing downward pressure on valuations.

In such a scenario, transaction volumes could fall below 2025 levels, with deals occurring primarily where sellers are prepared to adjust pricing meaningfully. The valuation gap may close not because buyers move up, but because asking prices gradually come down. Assets in secondary locations or with weaker tenancy profiles may face greater negotiation, while even prime areas could see more price sensitivity than in previous years.

That said, a continued dip would likely be measured rather than dramatic. The inherent scarcity of conservation shophouses and the strong holding power among many owners could still help prevent sharp corrections.

For buyers

It's safer if you don't base your decisions on optimistic projections. Assume a more conservative rental market and longer vacancy periods, and make sure your finances can withstand a delayed exit.

Of course, location is as important as ever. And I don't just mean the district's reputation. A shophouse along a main stretch with consistent foot traffic can perform very differently from one a few streets away. On top of that, you should also pay closer attention to vacancy risk, tenant profile, and remaining lease tenure.

For owners and landlords

If your property is in a prime footfall area, you may continue to hold firm. Otherwise, it might be more strategic to be flexible in order to maintain tenants. Plus, pushing for aggressive rent increases could backfire and cause longer vacancies. You should also prepare for more negotiation at lease renewal and possibly longer downtime between tenants.

If you need liquidity and are considering selling, price it where buyers are actually transacting, not where the market was in 2021. Deals are more likely to close when expectations are realistic. Overpricing may mean sitting on the market longer.

For Tenants

You may find slightly more room to negotiate in non-prime regions. However, prime areas with consistent traffic are unlikely to see meaningful rental declines, if at all. Competition for well-positioned units in these areas are likely to remain steady.

What 2026 holds for the shophouse market will depend on financing conditions, leasing demand, and whether or not buyers and sellers are willing to meet in the middle. A rebound is possible, but so is a standoff or even a further softening. But as it goes, it's better to be safe than sorry.

That said, shophouses remain a scarce asset. Their conservation status, central locations, and mixed-use flexibility mean they will continue to attract interest, just more muted. On top of that, liquidity can be slower compared to other property types.

So it's safe to say that shophouse investments aren't for everyone. It's more suited for investors who want to hold long-term like family offices or business owners looking for a stable location.

In any case, it's important to have a clear framework like Property Wealth System (PWS). Instead of paying all your attention to broad market sentiment, it's better to have strong fundamentals. After all, the best outcome may not always go to the boldest investor, but to the one who plans ahead.