If you ask a property developer in Singapore, don’t be surprised if they price their commercial properties five times or higher than a residential property.
Commercial properties are buildings or lands used for business activities. It could be shops, office spaces, and retail space for lease in Singapore. Meanwhile, residential properties are buildings or structures for dwellings, such as houses.
The price disparity between the two is vast, with commercial properties miles ahead of residential. But why is that?
1. BUILDING STANDARD
The infrastructure building standards for a home and an office building are different. For example, the law requires commercial buildings to follow the fire safety standards, such as building fire exits, using fire-rated doors, installing sprinklers, and equipping the building with hydrants and fire extinguishers.
You don’t normally find these features at home or required by the law. These things add to the cost of commercial infrastructures.
Commercial properties are usually in CBD and metropolitan areas. These areas have good business potential. Therefore, it is not surprising that the retail leasing in Singapore in these locations is skyrocketing. The economic opportunities plus the average price of commercial properties in the area drive the prices.
Another reason mall retail management demands higher rents from tenants for commercial spaces is because of maintenance.
For example, a mall is an example of commercial property. They have to maintain the cleanliness of the mall, the integrity of the structure, electricity, water, HVAC system, security, and other amenities that benefit the tenants. The more complex the maintenance work is, the higher the commercial space rental cost is.
4. APPRECIATION COSTS
Commercial properties appreciate faster than residential properties, especially in booming cities. Additionally, when the city is growing economically, more and more businesses flock to the area. Therefore, the demand for commercial properties increases tremendously.
The appreciation costs, plus the increase in demand and the skyrocketing average price of commercial spaces in the city, add to the total cost of the property. These are the things a property developer in Singapore considers.
5. TAX RATES
There is also a huge difference in the tax rates between commercial and residential areas. Besides tax rates, water and electricity rates for industrial and commercial use are different from residential use, too. Tax rates and utility rates tend to be higher.
Now, don’t be too surprised when the retail space for lease in Singapore costs you high.
Are you looking for retail leasing in Singapore? Visit Keppel Land for more information about retail spaces.