Singapore's real estate investment landscape has seen good progress despite economic uncertainties, particularly in the hospitality sector.

As the city-state evolves as a global financial hub and premier tourist destination, boutique hotels are capturing the attention of savvy investors.

Often housed in historic shophouses or buildings, these properties represent a unique intersection of heritage preservation, luxury hospitality, and smart investment strategy.

With growing caution in global capital markets, boutique hotels are emerging as a compelling avenue for diversification, offering steady returns, capital appreciation potential, and participation in Singapore's cultural tapestry.

The journey of boutique hotels in Singapore, typically defined as properties with fewer than 150 keys, is a testament to the city's ability to reinvent itself while honouring its past. From niche offerings in the 1990s, these charming establishments have grown to represent approximately 51% of Singapore's total hotel supply.

This growth reflects a fundamental shift in traveller preferences and investment strategies. Today's travellers seek more than just a place to sleep. They crave authentic experiences, personalised service, and a sense of place. With their unique character and intimate scale, boutique hotels are perfectly positioned to meet these demands.

Indonesian billionaire Leo KoGuan, director of Timemerchant Capital, has purchased boutique hotel 21 Carpenter for $100 million, setting a near-record price of $2.08 million per key (Photo: 8M Real Estate)

Properties like the Duxton Reserve and 21 Carpenter have set new standards in luxury hospitality, seamlessly blending heritage architecture with contemporary design and modern amenities. Their design-focused interiors distinguish them from standardised chain hotels, enhancing the traveller experience.

The 49-room Duxton Reserve was launched for sale at $90 million by JLL last October. It is said to have found a buyer for $80 million (Photo: Garcha Group)

A new frontier for investors

Boutique hotels offer investors a compelling proposition in a market where traditional asset classes face pressure from economic uncertainties and changing work patterns. These properties present an opportunity to diversify portfolios and tap into the growing experiential economy.

JLL's research reveals a surge in Singapore hospitality transactions within the sub-S$100 million segment, one that primarily includes boutique hotels. The number of these deals increased from just one or two annually before 2017 to a peak of 10 transactions in 2022.

Examining Singapore's hospitality transactions over the past two decades, which generated a total deal volume of approximately S$15.4 billion, boutique hotel transactions in this sub-S$100 million segment accounted for 12% of deals during this period.

Furthermore, shophouse transactions — a versatile property type that can include conversion into boutique hotels — increased from 4% of Singapore's total hospitality transaction volume between 2013 and 2019 to 7% post-2019.

This trend underscores the growing appetite for smaller, unique properties offering both charm and potential for strong returns. Located in central or historically significant areas, boutique hotels provide unparalleled guest experiences while capitalising on their prime positioning. The scarcity of shophouse properties suitable for hotel conversion adds to their appeal.

Government initiatives to preserve heritage buildings while encouraging adaptive reuse have also made shophouse conversion projects financially attractive. With strict conservation rules in place, these assets are likely to be appreciated over time, offering investors a hedge against inflation and market volatility.

One of the most intriguing aspects of boutique hotels is their potential for revenue diversification. These properties often integrate multiple income streams, housing trendy cafés, hosting pop-up retail events, or offering co-working spaces. This flexibility allows boutique hotels to adapt quickly to changing demands, making them a resilient asset class that can weather economic uncertainties and capitalise on emerging trends.

Aligning with regional appetite

Interestingly, the boutique hotel trend in Singapore aligns with broader regional investment patterns. JLL's Q1 2025 Asia Pacific Capital Tracker reports cross-border investment volumes into Asia Pacific reached USD 8.6 billion in 1Q2025, rising 152% year-over-year. This surge suggests international investors are increasingly diversifying their portfolios across the region, making Singapore's boutique hotels an attractive option.

Moreover, the report highlights that investors in Singapore now prefer higher-yielding, income-generating assets with minimal leasing risk. With their steady income streams and potential for capital appreciation, boutique hotels fit this profile perfectly.

Despite global challenges, Singapore's hospitality market has shown remarkable resilience. Hotel transactions remained strong in 2024, with nearly S$1.3 billion in sales. The Singapore Tourism Board's forecast of 18.5 million visitors in 2025, exceeding pre-pandemic levels, further underscores the sector's bright prospects.

This resilience extends across the region. Hotel transactions across Asia Pacific increased by 41% year-over-year in Q1 2025, highlighting growing investor confidence in the hospitality sector despite global economic challenges.

As Singapore solidifies its position as a global city of the future, boutique hotels will play a crucial role in shaping its identity and appeal. The trend towards experiential travel continues to accelerate, and Singapore's position as a global business and leisure hub solidifies the sector's growth potential.

For investors, boutique hotels offer a unique opportunity to diversify portfolios while participating in Singapore's cultural and economic evolution. These properties are more than just real estate assets; they are living, breathing parts of the city's fabric, offering guests unparalleled experiences and investors the potential for strong, diversified returns.

The conversion of historic buildings into boutique hotels is reshaping Singapore's urban landscape, representing a significant shift in the hospitality sector and urban development strategies. As this sector continues to evolve, it promises to offer not just returns on investment but a tangible connection to Singapore's past, present, and future.

In a world where differentiation is key, boutique hotels in Singapore represent not just a smart investment but a chance to be part of the city-state's next chapter in hospitality and urban development.

Isabel Wong is the vice president of investment sales at JLL Hotels & Hospitality Group, Singapore.

jll.com.sg

This article also appeared in EdgeProp Singapore