Boat Quay rule easing draws raft of hotel conversion plans for conservation shophouses

[SINGAPORE] A flurry of hotel conversion proposals have turned up for shophouses located near the Singapore River, with at least seven applications to turn the historic conservation properties into hotels after an easing of planning rules in June.

Most recently, owners of shophouses zoned for commercial use on two lots on South Bridge Road and North Canal Road submitted development proposals to the Urban Redevelopment Authority (URA) for rezoning to hotel use.

These follow similar applications made earlier by owners of another five shophouses.

Sophia Lim, director of capital markets at Cushman & Wakefield, observed growing interest from shophouse owners exploring conversion opportunities, “particularly where the existing commercial use may not be maximising the value of the asset”.

She added: “With Singapore’s hospitality sector continuing to perform well, some owners are evaluating whether hotel, serviced accommodation or other living-sector uses could generate stronger long-term returns compared to traditional commercial uses.”

A PropNex report on the shophouse market issued in July noted that overall shophouse leasing activity moderated further in the second quarter of 2026 “amid persistent challenges faced by businesses in the retail, services and F&B sectors”.

Planning restrictions on new hotels, hostels and serviced apartments in the Upper Circular Road and Beach Road areas were temporarily eased in June, a move that Minister for National Development Chee Hong Tat said followed industry feedback, and would enable developers and business owners to offer visitors a wider range of accommodation.

Under the previous guidelines, new short-term accommodation uses were generally not permitted in the two areas to avoid an “over-proliferation of such uses”, and to preserve the character of the mixed-use neighbourhoods.

The historic shophouses, some of which date back to the 1930s, are home to a wide range of restaurants, bars, shops, boutique offices and other lifestyle facilities.

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In all, URA received six applications for hotel use in the Upper Circular Road street block and one in the Beach Road street block since the policy relaxation was announced, a URA spokesperson said.

“This is an early indication of initial market interest,” the spokesperson noted, and added that it was in line with the authority’s aim to support a mix of commercial and accommodation-related uses that contribute to the city centre’s vibrancy.

“URA will continue to assess interest in new accommodation-related uses and evaluate applications as the market responds,” the spokesperson said. The easing of restrictions applies to proposals received from Jun 5, 2026, to May 31, 2028.

The Upper Circular Road street block, near Boat Quay, is bounded by New Bridge Road, North Canal Road and South Bridge Road, with Carpenter Street and Hongkong Street cutting across.

The Beach Road street block, in the Bugis/Rochor area, is bordered by North Bridge Road, Tan Quee Lan Street, Beach Road and Seah Street, and covers shophouses along Liang Seah Street, Middle Road and Purvis Street.

Notices of proposed amendments to the Master Plan showed that conversion plans have been put up for shophouses at 38 and 40 South Bridge Road, 54 and 60 South Bridge Road, 13 and 15 New Bridge Road, 41 Hongkong Street, and 30 North Canal Road.

Since the rule change was announced in June, more owners in the Boat Quay and Beach Road precincts have sought advice on converting their properties into hotels, serviced apartments or hostels, said Clemence Lee, executive director of capital markets at CBRE Singapore.

Interest has also come from hospitality operators, family offices and private investors seeking assets with conversion potential, Cushman & Wakefield’s Lim added.

Some owners are beginning to receive responses from URA and other authorities, “providing greater clarity on planning viability”, said Melvin Chay, interim head of capital markets at Knight Frank Singapore. 

He added that as design studies progress, the focus is shifting towards “financial feasibility”, with owners considering arrangements such as master leases and management contracts.

Economics of conversion

Shophouse rents in the Boat Quay area are among the highest islandwide. Median rents in District 1, which includes the Upper Circular Road block, rose 7.6 per cent to S$7.62 per square foot (psf) in Q2 from Q1, but were flat year on year, PropNex Research and URA data showed.

In District 7, where the Beach Road block sits, median rents fell 6.4 per cent to S$6.76 psf a month on a quarterly basis, and were 4 per cent higher on year.

Whether a conversion makes financial sense depends largely on the room rates and occupancy a hotel can achieve, said Christine Li, head of research for the Asia-Pacific at Knight Frank. She estimated that properties around the two proposed sites would generate a gross rental yield of about 2.7 to 2.9 per cent if retained for commercial use, based on asking rents of S$8 to S$9 psf each month.

A hotel conversion would begin to outperform commercial use at an average daily rate (ADR) of about S$300, assuming 80 per cent occupancy and a 30 per cent hotel net operating income margin. 

At an ADR of S$350 to S$400, net operating income yields could reach 3.1 to 3.8 per cent – representing an estimated income uplift of 16 to 35 per cent over the commercial rent case, Li added. The analysis excludes conversion costs.

At 38 South Bridge Road, owner and SLB Development chief executive Matthew Ong sought outline planning permission for a hotel with an estimated 35 to 40 rooms, based on media reports in July.

The shophouse was later put up for sale through Knight Frank at a guide price of S$38 million. Owners seeking to sell their properties are also capitalising on the planning changes, with some dangling a hotel conversion as repositioning potential.  

CBRE and Cushman & Wakefield are marketing three boutique commercial buildings at 40 Carpenter Street, 38 North Canal Road and 32 Hongkong Street. The owner has commissioned consultants to study conversion options.

The expression of interest (EOI) exercise has closed, with discussions under way with “a couple of buyers”, CBRE’s Lee said.

In the Beach Road precinct, ETC extended the EOI deadline for 402 North Bridge Road from Jun 11 to Jul 9. The six-storey building beside Raffles Hotel was put up for sale in May at a guide price of S$70 million.

The Business Times understands that negotiations are ongoing.

Two adjoining properties at 18 and 19 Hongkong Street were marketed in July, pitching the shophouses as “an attractive platform to explore larger-scale accommodation-led repositioning”, with one of the buildings already having backpackers’ hostel approval.