Quynh Nguyen, Sales Manager at Urbanland Asia Investment, the developer behind The Embassy Residences, has worked in the fields of architecture and real estate for the past seven years, accruing great expertise in the process. She shares her knowledge with us, giving us insight into the current situation and outlook of Cambodia’s real estate sector.
B2B: Can you describe the current commercial property landscape in Phnom Penh and any new developments of note?
Nguyen: The demand for offices in the Cambodian market is growing steadily thanks to the strong economic environment. The setup of new multinational corporations, relocation and expansion of existing corporations have boosted demand for larger commercial offices. The trend is shifting from converted villas and shop houses to commercial high-rise. The growing demand is met by the supply of many high quality Grade A and B office buildings such as Vattanac Capital Tower, Phnom Penh Tower, Canadia Tower, GT Tower and the upcoming Exchange Square, as well as an increasing number of Grade B/C offices.
Phnom Penh provides strong potential for retail because of our young demographics and increasing middle class with higher incomes and strong consumption habits. The retail market is expanding rapidly. Aeon Mall 2 is now being built at Toul Kork, while other newcomers are showing their aggressiveness and commitment, such as Lion Mall and Parkson. There is further contribution to the retail front with upcoming mixed-use developments such as The Bridge, Olympia City and mixed-use commercial towers such as Vattanac Capital Tower and Exchange Square.
B2B: The offer of living units in Phnom Penh includes condos, apartments and serviced apartments. Which ones are now attracting the most investment? Which one is the best investment and has the biggest capital growth?
Nguyen: Serviced apartments and condos are attracting the most investment. The current serviced apartments under operation maintain a strong rental return, especially those in the central district of town such as BKK1. Offering great project management, housekeeping and 24-hour concierge service gives serviced apartments a competitive edge over condos. However, recent condo developments have started to focus on providing that hassle-free factor that people like about serviced apartments, therefore, providing a competitive alternative to serviced apartments. In the long-term, condos with central locations, with great design aesthetic and good quality material finishes, great management service and good price point, will yield the highest rental returns and capital gain.
B2B: Which countries are leading the way when it comes to investing in Cambodian property?
Nguyen: The healthy Cambodian economy has been luring a strong flow of foreign investments. Main investors are from Asia, particularly China, Taiwan, Japan, Singapore and Hong Kong. The biggest investors come from China and Taiwan.
In Urbanland, we have strong support coming from Japanese and Singaporean buyers who invest in Embassy Residences for the long term. These are savvy investors who not only choose to invest in the best quality but also invest in companies with outstanding business practices. We are also fortunate to have a good number of young Cambodian returnees from France and the USA, as well as locals, who can appreciate and relate to the lifestyle that Embassy Residences offers.
B2B: Is apartment supply in-line with demand?
Nguyen: The residential market in Cambodia has seen steady increase in the demand for condos and serviced apartments. Cambodia is one of the fastest growing economies in the region. We have a growing middle class that is shifting from multi-generation family homes to single-family unit homes. The onset of the Asean Economic Community also plays a key role in boosting the number of expatriates living and working in Cambodia as well as drawing investments from the middle class population in the region who are experiencing price hikes in their home countries.
In response to this demand, there has been a large influx of foreign developers, notably from Singapore, China and Taiwan, as well as local developers seeking a piece of the pie. This results in a strong increase in condo supply expecting to reach 10,000 units by 2018. This exponential increase will most likely outstrip the steady demand in the intermediate term.
B2B: What are the most important things to look at when inspecting property or land in Cambodia for rent?
When considering leasing property or land in Cambodia, one must conduct due diligence on the landlord/developer by checking the legal status and ownership of the property and also the profile of the owner/developer. For example, you need to check whether they are well established in the market and have a strong record. With regards to ownership, there are soft and hard title — soft titles are only registered at the local council whereas hard titles are registered at the national level and are the most secure form of ownership.
Another point is definitely location. Because the city is developing at such a fast pace, one must consider the current situation of the area and also any future developments that might occur. Also, check if there are current government policies that affect the area.
Lastly, one must check carefully the leasing agreement and its conditions.
B2B: Any opinions on the Cambodian Construction Law currently entering the final stages of drafting? How would it change constructing standards in the country?
Nguyen: The fact that the Cambodian Construction law is in its final stages of drafting is a good sign for developers to ensure sustainable and consistent developments. Both local and foreign developers will need to comply. Compliance will definitely ensure the city is a better place to live and work in. It will provide people with a sense of comfort knowing that there are proper safety standards imposed. It will also help to ensure a high standard of construction. However, compliance is expected to be slow as there are many challenges inherent in the application of new laws in the Kingdom.
In the long term, those who comply will definitely have a competitive edge over those who don’t.
B2B: Business owners under leasing contracts have repeatedly raised concerns of landlords hiking up prices when the contract runs out. What’s your advice for them?
In order to get the best deal out of a lease contract, business owners need to carefully consider their business plans and set out their expectations when negotiating a lease. It is best to match your business timeline with that of your lease agreement.
It is imperative to study the lease contract carefully before signing, examining every condition. Termination and renewal of contracts is extremely important. One should add in an option for renewal for a period of time with a cap on the increase of the rent. Longer term leases are preferable to secure good rental prices, but early termination clauses should also be considered.