Tight market conditions, strong demand for office space and constrained levels of new supply are the principal reasons behind the rising occupancy costs in prime office markets across the globe.
Out of the top five most expensive office markets in the world, the Asia Pacific region contains four: Hong Kong, Tokyo, Beijing and New Delhi. With Hong Kong’s inherent lack of office supply, prime rents remain robust at $171 per square metre per month (psqm/m).
Demand from global financial and manufacturing companies kept occupancy costs high in Tokyo, while in Beijing pharmaceutical companies continued to expand.
Worldwide, office demand stemmed from the automotive, high-tech and energy industries. The latter is evident in Cambodia, where drilling off the coast near Sihanoukville has helped to increase office demand. Thus, companies such as Total and Chevron are large office occupiers, and new Japanese oil exploration firms will also establish operations in Cambodia by the end of 2013.
The growing insurance industry, particularly life insurance, is also a key office demand driver in Phnom Penh.
Cambodian Life, Manulife and Prudential jointly occupy more than 3,000 sqm of office space in Phnom Penh and will likely expand by the end of this year.
The top office buildings in Phnom Penh are seeking rents of between $21 and $28 psqm/m, and with the lack of high-quality office developments, rents are unlikely to decrease.
In terms of new supply, Vattanac Capital will be ready for occupation this year. The building will be the first Grade A office development in the Kingdom.
The development recently won an award for the best commercial property in Southeast Asia, and its specifications match many office buildings in Hong Kong and Singapore. This is not only welcome news for occupiers, but also helps to elevate Cambodia’s standing among investors.
Cambodia’s sound macro-economic fundamentals, the first Grade A office development in the country, and the continued expansion of multinational corporations will make 2013 an interesting year for the Phnom Penh office market.