3: CAMBODIA REAL ESTATE SECTOR OVERVIEW
3.3 KEY INVESTMENT AREAS: PHNOM PENH
The Realestate.com.kh Consumer Sentiment Survey in September of this year showed that 58 percent of respondents said that location was the defning factor infuencing their property purchase. Over 70 percent of property buyers said Phnom Penh was where they were looking to buy property, while nine percent claimed they wanted to buy property in the coastal town of Sihanoukville. Preah Sihanouk province has seen a surge of Chinese investment in the past few years, with most of the funds being put into development or tourist projects. Siem Reap, home of the Kingdom’s famed Angkor temple complex, saw a slight drop in demand as 5.3 percent of respondents said they were looking to buy there as opposed to 6.6 percent last year.
In addition to being Cambodia’s economic hub, Phnom Penh is home to almost three million permanent residents. What’s more, it remains the centre of foreign investment in the Kingdom. According to a World Bank report in 2015, Cambodia was second only to Laos for rate of urban expansion in Southeast Asia.
The metropolis now ofers everything you would expect from an international city. Its shopping centres, malls, skyscrapers, fve-star hotels as well as eateries and entertainment options help to draw tourist from around the world.
Phnom Penh’s economic activity centres on garment manufacturing, trading and small- and medium-sized enterprises. While the central business district is home to a host of banks and retail outlets, huge industrial zones can be seen spilling across the city’s borders into surrounding Kandal province.
Siem Reap’s temples come to mind when thinking of tourism in Cambodia, however, Phnom Penh leads the nation in foreign visitor arrivals. In 2016, 2.8 million international visitors came to the capital and accounted for nearly half of that year’s total arrivals. That total soared by 25 percent to 4.2 million international arrivals last year. Tourist numbers have doubled in the capital of the last fve year. Predictions show Phnom Penh hitting fve million international visitors over the course of this year.
Despite the fact that the capital has no zoning regulations or discernable urban plan, the Phnom Penh Master Plan 2035 seeks to foster expansion and construction of new infrastructure in order to accommodate an ever-growing population.
Boasting the highest land prices in the country, the capital’s Chamkarmon district recently saw land reach $6,000 per square meter. Prime plots in the city’s center are being sought to build commercial, residential and retail spaces. Districts such as Tonle Bassac, Daun Penh and Tuol Kork are following a similar trend of increasing activity.
Chroy Changvar district, across the river from Phnom Penh’s center, proves to be an area to watch in the coming years. A wealth of new developments have popped up there on the strength of increasing demand from both local and international investors. Plots in the district lack the congestion of the city but are quite close. Additionally, prices remain more afordable than more central districts.
Condominium projects are picking up speed in the capital, as well as in Sihanoukville. Projections have put the total condominium supply at aver 37,000 by the end of 2020. Investors should look at price, location and investment trends when determining whether a new project is sustainable. Quality and location will remain the defning factors for investors seeking strong rental returns and appreciation.
Another growing trend in the Kingdom’s real estate sector is mixed-development complexes, which house condominiums, office space, hotels and retail. Data has suggested that developers are aware that the market for condominiums is nearly saturated, and are hedging their bets with mixed-use spaces. On-site amenities also add more value to living spaces, which creates an ecosystem where a property can appreciate faster.
Commercial property is also transforming within Phnom Penh. The demand for both high-grade and mid-level office space throughout the capital is growing. A variety of high-rise projects are opening or set to open over the next few years. Grade B and C office complexes remain the most popular choices for local businesses. While grade A office space is generally too expensive for local businesses and start-ups, the city continues to cater to all types of budgets and many more commercial complexes are in the pipeline.
According to real estate agent body CBRE Cambodia’s Q1 MarketView, the supply of office space in Phnom Penh this year increased four percent quarter on quarter. Supply grew by 11 percent last year, however, occupancy rates have held steady at around 82 percent. This is the highest occupancy rate seen in the country since 2009. Approximately 160,000 square metres of office space is under construction and due to be operational in the next 21 months.
The growth of the Phnom Penh commercial property market is only set to continue in the future, especially since Cambodia has joined the Asean Economic Community (AEC). As investors from China pour into the country, many developers are developing projects to house the growing segment of middle-class workers. While some spaces are only available for rent, others ofer strata titles and allow investors to purchase outright.
The capital’s retail property market is similarly undergoing vast changes. International brands are joining the local market faster than ever. While some brands aim to capture the country’s middle class, many are targeting expatriates or upper-class locals. Meanwhile, homegrown operations are expanding by leaps and bounds.
Most notable is the infux of high quality shopping options in the Kingdom’s capital. Japan’s Aeon Mall was the frst shopping centre of its kind when it opened its doors in the summer of 2014. It has proven successful and is often packed full of shoppers who travel from rural provinces on the weekend. A second location of Aeon Mall was opened earlier this year and there are plans for a third location in the capital.
At the end of last year, the supply of retail space in the capital increased to 174,404 square metres. According to real estate consultant group Knight Frank, this total represented a 11.5 percent year-on-year growth. If all projects currently underway are completed, Phnom Penh can expect to see 592,475 square metres of lettable area by 2020. One major project in the pipeline includes Phnom Penh Megamall (formerly Parkson Mall), located along Russian Boulevard, as well as many other retail spaces within mixed-use developments and smaller community malls.