Prime Retail Real Estate: A Tale of Two Cities
Due to rising prime retail real estate prices, many new restaurateurs looking to set up shop in both Phnom Penh and Siem Reap are choosing whether to accommodate high property rental rates into their business costs in order to sit on the vein of the tourist and expat traffic – or whether they step outside the prime retail real estate zones and give their customers a reason to come to them.
In Siem Reap, says Dave Murphy of IPS Cambodia, who have offices in both Phnom Penh and Siem Reap, prime retail real estate space is heavily centered around Pub Street, and the surrounding lane ways. “In a city with far fewer expats than Phnom Penh,” says Murphy, “this is where the money really gravitates for restaurateurs.” Check out what's on offer in Siem Reap!
For those cooking in Phnom Penh, their scope for prime retail real estate, primarily, is around the riverside district, BKK1 and the central suburbs of Duan Penh and Tonle Bassac. “However,” notes Murphy, “where these businesses ultimate choose to set up depends on their products and who they are catering for - as most expats are not particularly attracted to the Riverside area.”
And, in fact, prime retail real estate rental prices in affluent areas such as BKK, Duan Penh and Tonle Bassac are growing faster than those on riverside, spurred by high demand - “which suggests,” says Murphy, “that F & B businesses in Phnom Penh are realizing there is a strong market in Phnom Penh that lies outside of the tourist dollar.” Check out what's on offer in Phnom Penh!
For Edward Carminati, managing director of Il Forno Restaurants in Phnom Penh and Siem Reap, BKK1 was the preferred location for his second Italian restaurant destination after great success in Siem Reap. “We didn’t choose to set up on Riverside,” says Carminati, “because we know, from our experience with our tourist driven venue in Siem Reap, that tourists primarily want to eat Asian food, and their spending limits are often smaller that the expat community.”
“In fact,” continues Carminati, “BKK1 offers us access to a whole new market.” In Siem Reap, 90 percent of Il Forno’s customers are tourists – the other 10 percent are expats, who predominantly work in the NGO sector. In Phnom Penh, Carminati’s new venue caters to 80 percent expats, 10 percent Khmers and a measly 10 percent tourist traffic. See BKK1 real estate here!“In Phnom Penh,” says Carminati, “the expat community has much higher spending power than we are used to in Siem Reap. Here you have the NGOs, but you also have the corporates. The long-term expats are looking for a taste of home, and an ambient, authentic dining experience – we can offer that all year round.”
Carminati confirmed that his costs of doing business are 300% higher in Phnom Penh’s BKK1, sitting on some of the countries most prime retail real estate, than they are in Siem Reap, but the profit available in Phnom Penh easily legitimizes these rates.
In Siem Reap, the market is far less complex. Pub Street is the pinnacle of demand for prime retail real estate thanks to a high turnover of affluent visitors, but likewise rental rates. “It is becoming an extremely hard area to break into for new business ventures,” says Murphy, “as pub street has quickly been deemed prime retail real estate leaving few owners willing to sell, and rental rates climbing every new term.” This means new F & B enterprises have no choose but to move off the main street, where rental rates are lower – but so is foot traffic.
However, in both Siem Reap and Phnom Penh, some restaurant owners are showing that it is not always crucial to have your property in the hottest areas. “Those businesses with high quality user reviews, and effective marketing, can take cheaper space in side streets off Pub Street, or a lesser known part of Phnom Penh, and customers will still find them,” believes Murphy.
Carminati notes that, in fact, Il Forno’s less prominent retail space in Siem Reap, launched in 2011, located down a laneway off Pub Street, has been a blessing in disguise. “Our rental rates are more reasonable than on Pub Street, although growing fast, and, in fact, our location offers customer’s privacy, relative peace and tranquility, something very hard to offer when your restaurant sits directly on Pub Street. This keeps us well-reviewed, which makes tourist willing to come and find us off the main drag.”
This is not unlike the booming F & B market in downtown Melbourne in the 1990’s, says Murphy. Spurred by the coffee culture boom, “any new cafe owners in the central Melbourne F & B industry either bought into prime retail real estate areas at huge cost – or did something very clever and unique to service their clients while they sat in the lower rental zones.” Check out IPS's listings here!
