Phnom Penh’s skyline has undergone a significant transformation during the past five years. With recently completed buildings such as Canadia Tower, Phnom Penh Tower and the forthcoming 39-storey Vattanac Capital, commercial office buildings are starting to dominate Phnom Penh’s landscape.
Given the dearth of modern office buildings, many organisations in Cambodia, such as Microsoft, Unilever and the UN, historically chose to renovate villas for their office needs. Many companies enjoy having their own building and paying rents as low as US$5 per square metre.
Research undertaken by CBRE Cambodia, however, suggests that when factoring the additional costs of occupying a villa, the rent per square metre is similar to purpose-built office buildings.
CBRE recently assisted a tenant to calculate their total costs in occupying villa accommodation. The current rent payable was $4 per square metre per month on the total floor area of the building - including areas such as toilets, stairs and lifts - yet, international standards dictate that the office should be measured on the net floor area - the useable space. On this basis, the rent equated to $6.5 per square metre.
The company then sought to calculate additional costs incurred through occupying a villa, but not applicable when in a purpose built office building. These included security, back-up generator rental and maintenance. With these additional costs considered, the true price per square metre hit $11.
Initial fit-out costs for a villa are significantly higher than those at a purpose built office building, as the latter come equipped with suspended ceiling lights, floor tiles and air conditioning units. Furthermore, significant alterations are usually required to ensure the villa is suitable for office accommodation. After analysing the extra fit-out costs, the rent equated to more than $15 per square metre.
Notwithstanding the costs, villas are rarely conducive for office space mainly because it is very difficult to achieve a modern open-plan office without undertaking substantial alterations. Therefore, staff often work in small rooms originally designed as bedrooms. But, with the advent of modern buildings, companies occupying villa properties will start to move in to modern office buildings.
During the 1990s, in major regional hubs such as Ho Chi Minh City and Bangkok, migration from villas to modern office buildings was the main driver of office demand, with Phnom Penh expected to follow suit in the next five years.