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Commercial real estate in Singapore is expensive, of that there is little doubt. According to a study conducted by Savills, a global property consultancy agency, the Lion City ranks as the 7th most expensive place for prime offices in the APAC region. Despite this, demand remains strong due, in part, to our strategic location, stable political environment and consistent pro-business policies.
Commercial property loans stand as one of the best ways to afford commercial real estate. In the past we covered factors that affect your commercial property loan as well as the costs and fees involved. Today, we’ll delve into the types of property eligible for commercial property loans.
Most businesses, especially SMEs, are unable to afford full payments for commercial properties with their current finances and require the help of banks or private lenders. These commercial property loans offer a relatively high LTV (loan to value ratio) of around 80-90% which allow businesses more financial flexibility to own commercial properties that typically cost more than residential ones. But what is commercial property?
Office buildings continue to be the most sought-after type of commercial property today. This trend aligns with the vibrant economic landscape, with more than 60,000 new businesses being established annually in recent years. They are categorised into three groups, namely Grade A, Grade B and Grade C, depending on their level of modernity and facilities.
A majority of office buildings are located in and around the CBD, but there have been concerted efforts to develop more commercial and business areas outside the CBD in order to balance out logistic and congestion issues. The decentralisation of office buildings has resulted in pockets of office buildings available in Jurong East. Paya Lebar, Woodlands and Tampines.
Retail outlets cover any and all types of business units meant to house brick and mortar shops. These include outdoor mall outlets, units in traditional shopping centres, shophouses, and more. Usually, businesses that need a retail outlet are those that need to provide physical or in-person goods and services to their customers. In short, these businesses cannot function in a purely virtual environment.
Examples of these types of businesses include restaurants, cafés, gyms, pet groomers, clinics, grocery shops and more.
Singapore’s heritage shophouses are an important part of its rich history. Most of these buildings date back to around the 1840s to 1960s, and feature two or more floors, a long and narrow design and an open air courtyard, usually in the middle of the building. Many of these shophouses have been renovated and upgraded over the years. The ground floors are usually occupied by a retail company while the upper floors play host to retailers or function as offices.
Heritage shophouses are still very popular, especially among retailers and those seeking office units. This is because rental rates are fairly reasonable, and the rental price of office units in these buildings are lower than those of more modern, newer office complexes.
Industrial buildings include warehouses, single use industrial properties, factories, factories with retail and industrial land. They are categorised into three main groups, B1, B2 and Business Parks. B1 covers buildings that have less than 50m buffer zones with the nearest industrial area, whereas B2 buildings are located more than 50m from these residential areas. The zoning system has been implemented by the Urban Redevelopment Authority (URA) to manage the impact of industrial pollution and other challenges posed by these areas to the local residents.
These industrial units are more commonly available on a leasehold basis, but occasionally you may find a freehold for sale.
Business parks are a fairly new concept, designed especially for knowledge-based, high tech and R&D companies. They are wide areas consisting of several middle class modern industrial buildings, with scenic landscaping and shared amenities. Business Parks can be occupied by just one, or multiple businesses who share the space.
Business parks are usually located in well-planned suburban areas, and play host to non-pollutive businesses with minimal environmental impact. The guidelines for businesses owning or renting business parks unit differ significantly, whereby these industries have to use at least 60% of the given space for their primary value-added production activities and not supportive or administrative activities.
We have listed the key properties that you can purchase with the help of commercial property loans. In general, they are grouped into the following categories, based on the URA’s definition:
When in doubt as to eligibility of a property for a commercial loan, consider its intended use or consult the URA zoning of the land or building of interest. Speaking to the developer or seller may also help clarify the property’s approved usage or classification.
Sign up today to explore our wide range of commercial property loans. With a single application, you can gain access to more than 45 lending partners on our platform, vying to offer the best rates. You can also speak to our experts if you need help in finding the right commercial property loan
Lina heads up all things marketing and branding at Lendingpot. With a keen aesthetic eye, she believes in the use of design to communicate with our SME community and aspires to turn Lendingpot into a household name. Out of work, she is an avid camper and appreciator of nature’s best works.
