THE surprise announcement that Cambodia may construct the world’s second-tallest building may be good news for Phnom Penh’s prestige, but developer Overseas Cambodia Investment Corp would likely face a considerable financial headache in the process.
At 555 metres, although the project’s sheer scale would no doubt be its greatest draw, a building of this size in Phnom Penh could also become a victim of its huge size. Quite simply, the capital would struggle to absorb the massive increase in space for rent.
Were the building to contain the same ratio of office space as Canadia Tower, for example, at four and a half times as big it would flood the market with roughly 45,000 square metres of work space, equal to nearly 50 percent of the current total in the whole of Phnom Penh.
Although this figure is set to double to 200,000 metres by 2013, according to a 2009 report by international property firm CB Richard Ellis, this would still represent oversupply in the capital even if the tower were not completed for another five years, a realistic time frame.
It is equally difficult to see the required demand for residential or commercial space in the city to justify a building on such a scale.
The world’s tallest building, the Burj Khalifa, suffered a similar problem when it opened this year. The huge additional property it added to the already-bloated market in Dubai further entrenched a slump, albeit one caused by the unprecedented global economic crisis.
OCIC has experienced similar problems in relation to Canadia Tower which has suffered from low demand and falling prices per square
metre. The firm would of course expect the property market to be healthier than it is today, but even so, surely Phnom Penh would find it difficult to accommodate such a huge addition to the market.
The world’s four tallest structures aren’t built in Dubai, Taipei, Shanghai and Hong Kong for no good reason – these are cities with huge economies and a large projected appetite for real estate in the longer term.
Accounting for supply and demand in Phnom Penh’s still-small property market would be entirely necessary given that this private venture could cost anything up to US$1 billion, when we consider most projects on a similar scale go over budget.
An added problem in Phnom Penh is that the contractor may be building on sand on Koh Pich, an extremely young land formation that experts believe is likely to change in shape over time.
Considering foundation piling, bank protection and other construction necessities based on this proposed river bank location, the project could incur high structural and engineering costs.
As noted on the Invest in Cambodia website: “Phnom Penh is built on soft foundations which necessitate expensive piling for high-rise buildings, and so construction costs are high.”
Project Manager Touch Samnang’s consideration to bring in South Korean building expertise seems to be the norm for similarly large-scale construction projects – Burj Khalifa, Taipei 101 and the Petronas Towers in Kuala Lumpur were all built by Samsung Engineering and Construction.
Still, any firm would face the kind of structural challenges posed by the riverbanks of the Tonle Sap. Even if Phnom Penh is largely immune to other threats such as earthquakes and typhoons, that the city is equally resilient to a huge oversupply in property seems much less likely.