Real Estate Evolution In The Kingdom
The Phnom Penh real estate market has undergone marked changes since Cambodia’s first general election in 1993. By harnessing an open-door policy on foreign investment, in concurrence with strong domestic growth, Cambodia largely avoided a recession during the global financial crisis.
The Cambodian real estate market of recent years has been defined by innovation; condominiums were introduced in 2008 with the launch of De Castle Royal and Rose Garden Condominium, and the first high-rise office building was completed in 2009. Mr. Ross Wheble, Knight Frank’s Country Manager since 2013, witnessed three new concepts enter Cambodia’s real estate market in the first half of 2014.
Firstly, Vattanac Capital Tower officially opened for lease. It is the first LEED-rated building in Cambodia and offers international standard, Grade A office space. Secondly, the completion of Aeon Mall has provided Cambodia with its first international standard shopping mall, well patronized since its official opening at the end of June 2014. Lastly, with the launch of The Bridge at the beginning of this year, Phnom Penh now has its first Small Office Home Office (SOHO) development.
Live-work units, otherwise known as SOHO, were first conceived for the cottage industries prevalent in preindustrial Europe. Advancements in technology and modern building design have enabled workers to operate in decentralized locations, providing benefits such as lower overheads and potentially greater productivity. The modern concept was first introduced in Singapore, where commercial and residential space is naturally in high demand. Wheble previously worked in Malaysia, where SOHO units were introduced in 2010/11. In Malaysia, SOHO units were used to circumvent the Housing Development Act as they were considered to be for commercial use as opposed to residential. This allowed developers to build higher density development projects.
Wheble suggests from his experience in Malaysia that SOHO units are more skewed towards condominiums than office space, with maybe one or two workstations within each unit for owners to use for office purposes. In Malaysia, the majority of purchasers were owner-occupiers and investors who would use the units for predominantly residential purposes, in addition to SMEs that would use them as start-up units for office requirements. It allows office users to actually own their office space as opposed to renting space within purpose-built offices, enabling them to benefit from capital appreciation and avoid the need to pay rent.
The Bridge is being developed by Oxley Worldbridge, a joint venture between Singapore’s Oxley Group and Cambodia’s Worldbridge Land. The project is a mixed-use scheme consisting of two towers built on top of a retail podium and will provide both condominium and SOHO units. The Bridge has set a new benchmark for Cambodia with sales prices starting from $3,000 per square meter. Reportedly, the take-up rate within the project has been strong. Despite this strong take-up, at this stage, we are not aware of any other SOHO projects in the development pipeline.
Wheble comments that despite concerns from some industry experts about a possible oversupply in the market across the main sectors (office, retail, and residential), long-term prospects for the Cambodian real estate sector are positive. Cambodia has a young population and a growing middle class that is currently underprovided for by the current market offerings. Surprisingly, the majority of buyers of condominiums have been Cambodian and, while there are approximately 5,000 condominiums scheduled for completion within the next five years, when you compare the overall number of units with a population in Phnom Penh of approximately two million, the market is still sustainable.
It is further strengthened by the 2010 Law of Foreign Ownership which allows foreign buyers to own property from the first floor and above. What we will see is an increasing number of developments undertaken by foreign developers which will improve the overall quality of the property stock in Phnom Penh. Furthermore, the tourism sector in Cambodia is a key growth area with more and more international hoteliers entering the market, which is evident with the entrance of Park Hyatt in Siem Reap. With improvements in infrastructure and the promotion of Cambodia by key stakeholders as a leisure destination in its own right, we anticipate rapid development in this area, and Knight Frank is excited about the future prospects of Cambodia.