Strata title space may be a relatively new concept in Cambodia but this emerging owner-occupier approach is shaping up to be a new asset class in Phnom Penh’s office market.
On CBRE Cambodia’s trend radar is that of businesses in Cambodia moving to higher quality office stock, with the property consultancy firm witnessing higher rental values per month of offices transacted in 2016.
The recent interest in strata title office space, whereby investors or owners can occupy the space rather than lease, was highlighted by CBRE Cambodia commercial agency manager James Padden at last month’s first annual Real Estate Market & Outlook Conference.
According to CBRE’s data, strata title office space will account for up to 25 per cent of total office stock by 2020.
Talking to Post Property, Padden explained that strata title office works on the same basis as Cambodia’s condominium law wherein 70 per cent of a building above ground floor can be earmarked for foreign ownership.
“No strata title office accommodation is currently completed, however we have seen strong initial interest with one project reporting to have sold all units off plan,” Padden said.
“There has been quite strong initial interest in what is a new concept in Cambodia with another recently launched project reporting 40 per cent off-plan sales within the first quarter of 2016.”
While there is no completed stock in the Phnom Penh market offering strata title office space, Padden described the pre-commitment from investors as healthy.
“In terms of occupancy, it does remain to be seen what the make-up will be of owner occupiers versus investors seeking a return from their asset,” he said.
To date, there have been five strata title office projects announced. First off the rank is TK Royal One, which has subsequently been followed by East Commercial Center, Diamond Twin Tower on Diamond Island, Fortune Tower within the Olympia City development, and The Gateway along Russian Boulevard.
According to CBRE, these projects will bring a combined 84,000 square metres of supply online by 2019, which will make up approximately 17 per cent of total office supply.
Padden said strata title office space would be attractive to two primary groups; investors seeking a return and treating their unit as an income-producing asset, and owner-occupiers for whom it makes sense to own their premises.
“In both senses there will typically be a longer term view held by buyers with investors looking for stable long term returns and owner-occupiers seeking to grow their business in Cambodia,” he said.
“This can suit international investment groups as well as private individuals. As the strata title enables foreign ownership, this type of investment is not restricted to domestic buyers.”
While Singapore-listed property group Oxley Holdings declined to comment on strata titles, recent media reports said the company is aiming to launch its maiden freehold strata-titled retail units at The Bridge for sale at the end of this month. Oxley’s deputy chief executive was quoted as saying it would be the first time a developer has launched strata-titled retail units for sale in Cambodia.
Overall, Padden remains bullish on Phom Penh’s medium to long-term office market fundamentals.
“Current demand for market space is good,” he said.
“When we look at the macroeconomic indicators, we see the market is growing well. Occupier size is showing real intention of growing as multinationals enter the market and domestic firms continue to grow.”