Restaurant owners in Phnom Penh and Siem Reap must choose between cheaper and offbeat locations, or pay the price for tourist traffic

Faced with rising property prices, many of the Kingdom’s new restaurateurs looking to set up shop in both Phnom Penh and Siem Reap are forced to choose between high rental rates in areas with high expat and tourist traffic or whether they want to step outside the highest rental zones and give their customers a reason to come to them.

In Siem Reap, retail space is heavily centred around Pub Street, and the surrounding laneways, according to David Murphy of Independent Property Services (IPS) Cambodia, an agency with offices in Siem Reap and the capital.

“In a city with far fewer expats than Phnom Penh, this is where the money really gravitates for restaurateurs,” he says.

For those cooking in Phnom Penh, their scope, primarily, is around the Riverside district, Boeung Keng Kang 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.”

For this reason, rental prices in these affluent areas are growing faster than those on Riverside, spurred by high demand. “[This] suggests that [food and beverage] businesses in Phnom Penh are realising there is a strong market in Phnom Penh that lies outside of the tourist dollar.”

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 limit are often smaller than that of the expat community.”

“In fact,” continues Carminati, “BKK1 offers us access to a whole new market.” In Siem Reap, 90 per cent of Il Forno’s customers are tourists – the other 10 per cent are expats, who predominantly work in the NGO sector. In Phnom Penh, Carminati’s new venue caters to 80 per cent expats, 10 per cent Khmer and a measly 10 per cent tourist traffic.

“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 were 300 per cent higher in Phnom Penh’s BKK1 than they are in Siem Reap, but the profit available in Phnom Penh easily legitimses these rates.

In Siem Reap, the market is far less complex. Pub Street is the pinnacle of demand 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 premium real estate leaving few owners willing to sell, and rental rates climbing every new term.” This means new food and beverage enterprises have no choice 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 said 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 food and beverage market in downtown Melbourne in the 1990’s, says Murphy. Spurred by the coffee culture boom, “any new cafe owners in the central Melbourne [food and beverage] industry either bought into prime retail areas at huge cost – or did something very clever and unique to service their clients while they sat in the lower rental zones.” James Whitehead, Realestate.com.kh