But the far-fetched rentals landlords were hoping to charge at the height of Cambodia’s economic boom last year have been scaled back
A LONG-STANDING shortage of office space in Phnom Penh is helping maintain rental prices even as vacancies have increased due to overseas investors scaling back operations in the wake of the global financial downturn, real estate agents and landlords say.
However, the far-fetched rental prices many were asking - but not getting - at the height of Cambodia's economic boom in mid-2008 are now a thing of the past as landlords find themselves actually needing to find new tenants.
Vutha Oum, director of Angkor Khmer Real Estate, said many businesses - mainly from offshore - cancelled leases after being caught out in the fallout of the global financial crisis, but vacancies were being quickly snapped up by business people who previously had to make do with temporary offices in villas, apartments or hotels.
He said the average asking prices of $17 to $25 per square metre in mid-2008, which were up from $10 to $15 a year earlier, had shown no sign of decline in recent months.
Seng Chreang, a local businessman looking to find an office for his travel business, confirmed it was still a sellers' market. "I have looked at many places to rent an office but the prices are very expensive; $18 to $25 a square metre," he said.
Sear Chailin, director of Visal Real Estate, said that the number of businesses looking for office space had actually increased by around 35 percent in recent months as supply loosened, helping keep prices high. The majority of office seekers were still foreigners, he added, with Cambodians generally more happy to operate out of their apartments and villas.
I have looked at many places to rent an office
but the prices are very expensive.
"If [foreigners] rent an office space to do business, they want a very comfortable and safe place with plenty of parking," he said. "If they are forced to rent office space in a villa or flat, they also have to pay a lot extra for security."
However, Sung Bonna, president and CEO of Bonna Realty Group and president of the National Valuers Association of Cambodia, said rentals had dropped by 10 percent in some areas.
Lay Ieng, the owner of the Phnom Penh Centre, is among those scaling back rental demands from a peak in mid-2008. But rentals were still high compared with 2007, she said.
"If we compare to then, rentals are still high and we have very little office space available for rent," she said.
She said rentals increased from around $9 per square metre in 2007 to $15 in June last year but had come off again to around $12 per square metre.
Phnom Penh has only about eight major office buildings available and near full occupancy rates in the middle of 2008 encouraged owners to increase rentals. However, with most tenants already under contract, the rates being bandied about - up to $25-plus per square metre for basic office facilities - were never tested by the market.
Sear Chailin said rentals were actually increasing in some cases - from $25 up to $30 or $35 - but those prices included utilities to attract tenants as high electricity prices in Cambodia are considered a major barrier to business.
Lann Sinnara, deputy director of Cambodia Estate Agent, said new supply slated to come onto the market could eventually lead to falling rental prices.
However, it is still uncertain just how much new supply will materialise.
Canadia Bank's 29-storey headquarters on the corner of Ang Duong Street and Monivong Boulevard is scheduled to top out in 2009, though uncertainty surrounds the proposed 45-storey Sun Wah Financial Centre and the 52-storey GS International Financial Centre.
Vattanac Bank's proposed headquarters, which at 38 storeys will dwarf the neigbouring Canadia Tower, is under construction but no date has been set for completion.