ALMOST a decade ago, Sebestian Soh got the idea to buy a shophouse, one of the two- to three-story row buildings that are distinctive of old Singapore. He’d recently returned to Singapore after going to university in London, and to his eyes shophouses had a kind of magic.

“Everything is new in Singapore except for shophouses, so in a way these are works of art-every shophouse has a different way of expressing itself, a different facade,” Soh says. “These are spaces that we can never re-create.”

Because he would be investing family money, he needed sign-off from his father, a seasoned real estate developer. The elder Soh was initially unconvinced. Soh, now 34, studied the market for four years, and eventually his father allowed him to take the plunge in 2018. Since then, Soh has bought 23 shophouses in quick succession using his family’s wealth. His first purchase has more than doubled in value.

There are only about 6,500 historic shophouses in Singapore given conservation status. Built during the colonial era from the 1840s to the 1960s, the early ones served merchants and their families with stores at street level and living quarters on the upper floors. As waves of immigrants moved to Singapore, shophouses became cramped, shared dwellings.

But in an arc familiar to rehabbers of brownstones in Brooklyn, New York, and London Victorian terraces, the rows have gone from being thought of as urban relics to high-priced symbols of sophisticated city life. With their colourful facades, ornate plasterwork and covered walkways, they are sought after for hipster restaurants, bars and boutique hotels, which are doing brisk post-pandemic business as tourism returns to the city-state.

Demand is also being stoked by Singapore’s efforts to regulate housing costs. The city-state in April slapped additional levies on locals buying second homes and on foreign buyers purchasing any residential dwellings at all in a bid to cool a red-hot market. Shophouses, the bulk of which are classified as commercial, escape those rules. Loyalle Chin, a real estate agent who specialises in shophouses, has sold seven commercial ones since late April. “Both locals and foreigners have more incentive to channel their assets into commercial real estate,” he says, because of that exemption.

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Prices for shophouses have surged to a record S$5,500 per square foot-double Manhattan’s Upper Fifth Avenue, the world’s most expensive shopping street in 2022. Sales of shophouses jumped 44 per cent, to S$415 million, in the second quarter from the preceding one, according to Knight Frank. Mary Sai, executive director of capital markets at Knight Frank Singapore, projects sales to reach as much as S$1.5 billion in 2023.

In the biggest deal this year, a Chinese investor paid S$80 million for a row of six shophouses in Boat Quay, a stretch famous for its nightlife. Another river-facing unit in the area sold for S$30 million in May. Soh gets a weekly unsolicited offer for each shophouse in his family’s portfolio. Their rents have also tripled over the past three years.

Soh’s first shophouse purchase is now home to his family office. Along Telok Ayer Street in Chinatown, the cyan-blue building adorned with calligraphy frescoes is next to a Michelin-starred restaurant and a few steps away from Thian Hock Keng, the island’s oldest Chinese temple. “There’s tremendous demand,” Soh says as he brews tea on the third floor. “Now we’re no longer able to acquire-it’s quite hard.”

The squeeze has not gone unnoticed by the government. In July it further tightened real estate rules, announcing that foreigners need approval to buy properties that are meant for both commercial and residential use. But that is likely to have limited impact, as the rule affects only about 5 per cent of shophouses, says Lee Sze Teck, senior director of research at Huttons Asia.

Restoring a shophouse is often a costly and time-consuming affair because of the age of the building and a web of strict conservation rules. After Singapore gained independence in 1965, many traditional villages and low-rise buildings gave way to modernisation. But in the 1980s and ‘90s the city-state became more interested in holding on to its historic roots, and buildings in historic districts such as Chinatown and Little India were designated for conservation.

The Joo Chiat neighbourhood, which was long associated with seedy brothels and karaoke parlours in dilapidated shophouses, is now one of Singapore’s liveliest and most Instragrammable districts. On the weekend, young people and tourists can be found milling around its candy-coloured shophouse streets, snapping selfies.

In April, fashion brand Coach opened its largest concept store in the world in a three-story shophouse. Many of the island’s best dining spots are also in shophouses, including Bjorn Frantzen’s three-Michelin-starred Zen and the popular local restaurant Kok Sen. “Retail outlets want to move out of malls-they want to come into shophouses because they can create curated, unique experiences that aren’t homogeneous,” says Chew Kok Yong, co-founder of design agency Afternaut, who works with Soh on several of his shophouses.

Soh and Chew are hoping to do the same in Geylang, Singapore’s infamous red-light district. The duo want to revitalise the area after many of the businesses there were hit hard by the pandemic. The plan: Old meets new. Think a traditional Chinese pastry shop and a brunch cafe aimed at young people. “We want to reinvent the use of space,” Soh says. BLOOMBERG