06 Cambodian Real Estate 1/2 (ISSUE 01 in December 2017)

Land Price

According to the Bonna Realty Group’s report, the land price increase rate in Phnom Penh and major cities in the first quarter of 2017 was lower than the previous year.  Nonetheless,land prices are still rising.

Mr. Ross Wheble of Knight Frank, a real estate consultancy firm with more than 120 years of history, is a real estate specialist and a member of the Royal Institution of Chartered Surveyors., The firm is regarded as one of the world’s leading governing bodies in real estate. Mr. Wheble, who has lived in Asia for seven years including Malaysia commented, “The most expensive land prices are still the very central locations, in the city. A lot of investments have been going to the residential sector, targeting foreign investors with the most popular area being BKK1 and Tonle Bassac. Land prices have been increasing by 15 to 20% per annum over the last four or five years, but now the investment is shifting to locations outside of the city center. I often get asked in which direction the city is growing in, but the city is growing in every direction.

Sen Sok, where they’re building the second AEOM MALL is growing rapidly. This area also has attracted a lot of investment in infrastructure and road improvement. The land prices have gone up by almost 100% over the past three years in this area. Infrastructure drives property investments. Chroy Changvar is another area along National road 6 leading to Siem Reap. After the completion of the second bridge and the road improvement on National road 6, the prices have risen and now there is more development happening in the area.

Another location is near the airport. You have the Japanese developer there, “CREED GROUP”. There is also a development being led by a Malaysian group, the “Lion Group”, who are looking to build another big shopping mall. The land prices in that location are increasing as well.”

In addition, talking about land prices, he predicts, “The elections are coming up next year, so the market will slow down a bit. But when you look at the economic fundamentals for Cambodia, we foresee that real estate in Cambodia will continue to grow for many years. The real estate growth rate and land price increases are both difficult to forecast.  , But I think for land, we will still be looking at around 10% per annum in prime locations, and for other areas it could be much higher.”


Office Rental

According to the report of Knight Frank, there was an existing supply of 217,913 sqm of office space in the first half of 2017. This was an increase of 21% from the first half of 2016, and by 2020 it is expected to increase by 60% to 529,143 square meters.

Demand for office space is increasing. According to the Knight Frank’s report, the occupancy rate of office space in the second quarter of 2017 was 88.2%, up from the previous quarter. This is seen as an increase due to the rise of foreign companies entering Cambodia.

The rental space is divided into three grades.  The average rent in the first half of 2017 was 28 dollars/㎡ for grade A, 20 dollars/㎡for grade B, which had risen 11.2% from the previous year, and 10~15 dollars/㎡for grade C which had decreased by 1.2%. Currently, grade C offices make up the majority of office space supply, but grade A and grade B buildings under construction account for 96% of the total future supply. As domestic companies aim to improve their image to counter foreign enterprises entering into the market, the trends of developers and tenants have largely changed to offices of grade A and B, and many grade C offices no longer meet the market demand.

Also in the last few years, the collaborative work office space for enterprises in the startup period has been showing a significant increase in demand, globally and in Cambodia. Mr. Morgan Lee of CORE Property, which plans to open a complex facility in Phnom Penh, said “we are developing industrial and commercial complex facilities as a business hub to help SMEs in Cambodia enter the start-up phase.  So we will prepare the space that enables collaboration, in addition to office space, shops, factories and restaurants.”


Renting of retail space

According to the Knight Frank’s, the existing supply of retail space is 162,405 square meters. It is estimated that by 2020 it will rise 265% to  430,275 square meters. The current occupancy rate remained flat at 90% during the first half of 2017.

AEON MALL, which became the first international standard mall in Cambodia, still holds the occupancy rate of approximately 95 %, and in 2018 AEON Mall 2 will open in Sen Sok District. As the area attracts attention, Mr. Sorn Seap of Key Real Estate also said, “In the case of rental of retail property, it is best to be in the downtown area, Toul Kork area firstly, and secondly Sen Sok District where AEON MALL 2 will be built. There are many construction projects currently in progress.”

The construction boom of other large commercial facilities has continued.  The construction of Thai Boon Roong Twin Tower Trade Center has been announced and it will be the biggest commercial facility in Phnom Penh, with about 5 hectares, with an investment of $5.1 billion US dollars. These are generally a complex facility with shopping malls, offices, condominiums luxury hotels. and retail components. The 133-storey twin towers will be surrounded by four 42-storey buildings which will be completed in 2022. If it is completed, it will be the largest building in Southeast Asia.

As a change in commercial facilities, Mr. Grant Fitzgerald of Independence Property Service (IPS) noted, “as condominiums, residential and commercial facilities increase, the importance of property management is also increasing. Previously, you could attract tenants just by placing a manager, but now there are many competitors, professional enterprises with high expertise are required for both commercial facilities and condominiums.”