IPS (Independent Property Services) a premier real estate company with strong local connections, has gained a reputation for providing a no-nonsense, professional approach to real estate ensuring clients were well represented in a market that is difficult to navigate.
Established in 2009, IPS-Cambodia is one of the very few firms that has successfully integrated western business practices in the Cambodian business environment and has grown quickly in its nine years of operation and now has two strategically placed offices in Cambodia’s dynamic business districts of Phnom Penh and Siem Reap and through it’s partner network, they provide representation in Sihanoukville, Kampot & Kep, Battambang, and Poipet.
Today, IPS stands out in the crowded Phnom Penh real estate field as the boutique Cambodia property and real estate company of choice because of it’s consistent track record. With a strong focus on outcomes, IPS shares its outlook in this interview with Grant Fitzgerald, County Manager of IPS.
How has the real estate industry evolved in Cambodia in recent years?
The Cambodian Real Estate sector continues to evolve at a rapid pace and is well on the way to catching up to its neighbors in Thailand and Vietnam. In the residential market, 2015 and 2016 were the years of the condominium as we saw close to 50 new condo projects approved and start development. A lot of these projects will be complete this year. Over the past 5 years, the commercial sector has seen the addition of a plethora of legitimate A and B grade office space into the market which has transformed commercial market away from the once popular “commercial villa”. We have also seen a steady influx of local and international F&B chains in recent years; Crispy Crème, Carl’s Junior, Burger King, Dairy Queen, Starbucks, just to name a few. You will even find a KFC in Battambang now. The government continues to become more sophisticated as it tightens the enforcement of existing laws (foreign ownership and property taxes) and implementation of new laws, including few structures for real estate agencies.
What have been the major factors for these changes?
One of the major factors behind these changes has been the government. There has been a relatively recent push by the government to attract foreign investment into Cambodia and the Government has laid the necessary framework in order for this to happen. Updates to foreign ownership laws specific for condominiums was the catalyst for the condominium boom. A continuing focus on allowing businesses to easily enter the market along with strengthening necessary laws has resulted in an influx of international businesses and the commercial sector has responded accordingly. All these have been big positives to the real industry.
Another factor that shouldn’t be overlooked is Cambodians insatiable appetite for real estate investment. In general, Cambodian like to own something they can see and touch (the local stock market has yet to take off) and traditionally real estate has been their preferred place to invest. The middle class has grown quite rapidly over the past decade and this has created more and more demand for real estate and real estate investment opportunities.
What challenges remain in Cambodia regarding the real estate industry?
With a huge amount of new commercial and residential buildings coming online over the next 3 years a big challenge that the industry will face in property management. Effective property management plays a critical role in maximising the life, assets and the all-around aesthetics of a building. In addition to this, delivery of building services is already becoming increasingly important to attract and retain tenants, as complexes search for a point of difference in a market rapidly increasingly in supply. You only have to scratch the surface to see that that property management in Cambodia is currently under skilled, with plenty of room for improvement.
Return on investment will also be a challenge in some sectors of the market, more specifically the condominium market. The sheer number of developments available will impact potential capital growth and also affect rental yields. I believe the yield/capital growth rates promised 2 years ago are attainable in the current market and it will be interesting to see how the market responds.
What projects have IPS undertaken that you are most proud of and why?
In the commercial sector, more international corporations are setting up offices in Cambodia, and as part of their lease, are requiring professional property management services within their chosen office building. 2017 saw IPS take on a number of property management contract with large commercial projects including Raintree Commercial Building, Pipay Tower, and Factory Office Space. These projects all involved the provision & implementation of building set up documentation including, tenant handbooks, fit-out guidelines, building rules & regulations, standard operating procedures and emergency procedures. – something that the market is in desperate need of. Owners are beginning to acknowledge their tenant’s requirements and the limitations in what they can deliver through the traditional “family management” setup. It’s exciting to be at the forefront of the shift towards improving safety and services for tenants in Cambodia.
What projects have IPS proven most challenging and why?
Property Management is definitely the most challenging area for us at the moment. There are a number of reasons for this. Firstly, many property owners are currently unwilling to pay the required fees for a professional management company with experienced staff, instead settling for cheaper options, often hiring family members with limited capabilities. It’s a constant challenge convincing property owners of the value you bring through tenant attraction, tenant retention and asset maintenance.
Secondly, you can have all the forms and procedures in the world but they essentially mean nothing unless they are implemented properly and used on a daily basis. Finding capable staff, within the budget constraints of a property management contract is an underlying issue within this sector and one of the reasons this sector under delivers. It requires quite a bit of training and oversight to ensure that staff is meeting necessary standards. Its tough work but definitely doable.
What demographic of customers are IPS working within Cambodia, and has this changed at all over time? Do you think it will change in the future?
IPS clients come from a varied demographic base which has become wider over the past 3 years or so. In its inception, IPS Cambodia was mainly servicing Western (European, American, Australian) and Asian (Malaysian and Singaporean) expats looking for property rentals. However, as the Cambodian real estate sector has opened up to international investors, this has impacted our client base demographic. We now have clients from China, Japan, Hong Kong, Korea, India, Philippines, Thailand, Vietnam and Eastern Europe. In addition, whereas our Cambodian clients were traditionally property owners, we now have a lot more Cambodian buyers coming through our doors.
With Cambodia’s growing relationships with its Asian neighbours, I believe the future will bring a greater number of Asian expats and investors into the country. This trend has actually already started and its something that will grow in the coming years.
What are the main advantages of clients employing IPS services over other agencies?
I believe that IPS stands out in the market due to our local market knowledge and professionalism. We have been here for 9 years now and have done pretty much everything there is to do in this real estate market. This background and knowledge give us the ability to advise our clients in the safest and most effective methods of doing business in the Cambodian real estate market. From a professionalism perspective, you can see the difference in standards when you walk into our office and are greeted by our staff, this professional flows through our services right down to our contracts and client welcome packs.
What are the most exciting things happening in the industry right now, and can we expect to see some of these things in Cambodia in the near future?
The most exciting up and coming things happening in the next few years will be the finalisation of commercial and residential projects. There will be at least 3 new malls coming online in Parksons (2018), Aeon 2 (2018) and Eden Gardens (2018). There are also projects such as The Bridge (2018) and The Peak (2020) which are mixed-use residential developments combined with high-end retail & F&B.
From now until 2020 we will see a huge volume of condominiums being completed and hitting the market. It will be very interesting to see how this impacts or rental prices and resale values in the coming years.