🏭 Leasehold vs Freehold Food Factories in Singapore: Which Should You Buy?

“A common question often asked is whether buying a leasehold food factory is better, given that the leasehold price is usually more attractive compared to a freehold. Let me break it down with a full analysis to highlight the key points.”

Harrison Food Building at MacPherson

Supply and Demand

Before we dive further, let’s take a closer look at the current market supply and demand situation. Generally, demand for food factories comes from cold storage, central kitchens, food processing, and catering businesses. This demand has been strengthening since the COVID-19 period in 2021, transaction volumes rose from $122 million in 2021 to $192 million in 2022 ( only for your reference).

However, supply remains constrained as zoning for food factories is far more limited compared to other industrial uses. As a result, demand is strong while supply stays only moderate.

In conclusion, when supply is lower than demand, property prices tend to remain resilient. However, there are still many other factors that can influence prices, which we will discuss later.

Government Initiatives: Singapore's "30-by-30" initiative, aiming to produce 30% of food locally by 2030, is expected to drive demand for food manufacturing spaces.

EcoFood@Mandai

Should buy a food factory or simply lease it? Let’s explore which option makes more sense.

Description	Buying a Food Factory	Leasing a Food Factory
Upfront Cost	High – Down payment, stamp duty, renovation costs	Low – Usually 1–3 months’ rent deposit + fit-out
Monthly Outflow	Loan repayment (can be lower than rent in long run)	Rental payments (subject to landlord increases)
Asset Value	Builds equity, potential capital appreciation	No ownership, rent is sunk cost
Renovation Freedom	Full control – customise to business needs	Limited – subject to landlord approval
Long-Term Benefit	Wealth building, stability in cost	Preserves cash flow, lower commitment
Risk	Long-term commitment, tied to business stability	Possibility of eviction if landlord sells or ends lease

In conclusion, purchasing a food factory is generally more suitable for established businesses with sufficient capital and long-term operational plans. On the other hand, leasing is often a better fit for startups, expanding businesses, or those experimenting with new concepts.

Beyond this, an important question remains: does owning the property offer greater potential for capital appreciation compared to renting?

CT FoodNex

Does owning the property offer greater potential for capital appreciation compared to renting? Lets do a financial calculation to explore further

Base on the Freehold food factory buy vs renting comparison :

• Property type: Freehold food factory

• Size: 1800 sqft

• Purchase price: $3,000,000

• Interest rate: 1.9% per year (assume fixed for simplicity)

• Loan tenure: 30 years

• Assumptions: 75% Loan-to-Value (LTV), 25% down payment, 3% annual property appreciation

• Rental base on $3 PSF not yet consider the yearly rental increment

Category	Buying (Freehold)	Renting
Upfront Cost	$600,000 (20% down payment)	$16,800 (3 months deposit)
Loan Amount	$2,400,000	N/A
Monthly Payment	~$8,817 (principal + interest)	$5,600
Total Payment (30 yrs)	~$3,174,000 (loan + interest)	~$2,016,000
Total Interest Paid	~$774,000	N/A
Equity/Ownership	Own property after 30 yrs	None
Estimated Property Value After 30 yrs	~$5,430,000 (assuming 2% annual appreciation)	N/A

( The calculation is base on estimation only for reference )

In conclusion, the key advantage of buying is equity and potential appreciation. After 30 years, the property is fully owned and estimated to be worth around $5.43 million (assuming 2% annual appreciation). In contrast, renting provides no ownership or long-term asset accumulation. ( Annual appreciation is base on Freehold property estimation for your reference only )

In summary:

Buying: Higher upfront cost, but offers strong long-term value through ownership and appreciation. A freehold property provides steady rental income without lease expiry concerns, while still benefiting from capital appreciation.

Renting: Lower upfront and monthly costs, but no asset accumulation or equity growth. There is also the risk of the landlord selling the property, high relocation expenses, and recurring yearly rental increases as common concerns.

For businesses looking for long-term wealth accumulation and the potential benefits of property appreciation, buying is generally the better financial strategy. Renting may be suitable for those prioritising short-term flexibility or avoiding large upfront commitments.

We now have a clearer understanding that buying a food factory generally offers higher potential compared to renting. However, the question remains: should you opt for a leasehold or freehold property? Which is the better choice, and what are the pros and cons of each?

Food Vision @ Mandai

Freehold vs Leasehold food factory which is a better investment?

Previously, leasehold food factory buildings were typically approved for 99-year or 60-year leases. However, new launches today are granted a maximum of only 30 years. The advantage is that prices are generally lower compared to those with longer 60-year leases. On the downside, the shorter the lease, the faster the property value tends to depreciate. Does it still worth while to buy a leasehold property with only balance 30 years or less ?

Freehold vs Leasehold Comparison :

Factor	Freehold Food Factory	Leasehold Food Factory (e.g., 30/60 years)
Tenure	Ownership in perpetuity (no expiry)	Fixed tenure (commonly 30–60 years); reverts to state upon expiry
Upfront Price	Higher purchase price per sqft	Lower purchase price per sqft
Financing	Easier for banks to finance; higher LTV	Shorter loan tenure; banks may reduce LTV for short leases
Monthly Repayment	Higher due to larger loan amount	Lower due to smaller loan amount
Value Retention	Strong — retains value over long term	Declines as lease shortens, especially <30 years
Resale Market	Strong demand from investors & businesses	Smaller pool of buyers, resale harder as lease runs down
Capital Appreciation	Higher long-term appreciation potential	Limited appreciation due to lease decay
Rental Yield	Lower yield % (due to higher price), but steady	Higher yield % (lower entry cost), but short-lived
Best For	Long-term investors looking for wealth preservation and legacy asset	Businesses seeking lower upfront costs, or investors looking for shorter-term rental income
Risk	Lower risk, long-term value is preserved	Higher risk, value diminishes with time

In general, whether newly launched or resale, leasehold properties with 30 years or less remaining are harder to resell, mainly because bank financing is more difficult to obtain and loan-to-value ratios are lower.

By contrast, residential properties with 99-year leases remain attractive investments due to their longer tenure. For industrial properties, it is best to purchase those with at least 50 years of lease remaining, as values tend to depreciate much faster once they fall below this threshold."

Rough guideline for 30-year leasehold industrial property :

• Year 1–10: Value may fall only 1–2% per year (due to strong utility).

• Year 11–20: Closer to 3–4% per year.

• Year 21–30: Can drop 5%+ per year, especially as financing dries up.

Year	Remaining Lease	Value (% of Original)
0	30 yrs	100%
10	20 yrs	67%
20	10 yrs	33%
30	0 yrs	0%

( Information is only for your reference )

Leasehold - Properties with less than 30 years remaining are generally more suitable for businesses with budgets that do not require a long operating horizon. However, for businesses planning to operate beyond 20 years, it is advisable to invest in leaseholds with more than 50 years remaining.

Freehold - Similar to residential properties, freehold food factories remain highly sought after as a secure investment, despite the higher upfront cost. This is especially true given the very limited supply of freehold industrial land, the annual capital appreciation for freehold food factories in Singapore typically ranges between 3% and 5%, depending on location, property features, and market conditions.

In conclusion, Both leasehold and freehold food factories come with their own pros and cons. For businesses seeking long-term security and wealth preservation, freehold is the ideal choice. Leasehold options require a lower upfront investment, but the main challenge lies in depreciation over time.

Feel free to WhatsApp me or Contact me for any enquiries on buying, selling, or leasing food factories, or if you have any questions." You can send

You might also like to learn more about the 4 FREEHOLD new launches food factory and arrange for a viewing appointment.

Project	Location	Size From	From $PSF	TOP
Harrison	Machperson	1,800sqft	$1,700 PSF	Dec 2028
Eco@Mandai	Mandai	1,700sqft	$1,400 PSF	Dec 2027
CT FoodNex	Mandai	1,800 sqft	TBA	Sep 2027
Food Vision@Mandai	Mandai	1,700 sqft	$1,400 PSF	Dec 2026

“A good investment delivers higher returns with minimal capital outlay.”