After repeated delays, Cambodia’s tallest building will test a sluggish office space market
Low occupancy at the new buildings is probably a result of ineffective marketing.
AS new office buildings in Phnom Penh sit vacant in the midst of a contracting economy, eyes in Phnom Penh are tilting upwards in anticipation of the opening of Cambodia’s first skyscraper.
“As far as the rental office market in Phnom Penh is concerned, Canadia [Tower] will be a barometer in terms of rental values, in terms of the levels of demand, and take-up rates,” said Daniel Parkes, country manager at property services company CB Richard Ellis Cambodia.
“Everybody is looking at Canadia and waiting to see what happens to that before they make any judgements on the market here.”
Judging by figures released recently by Bonna Realty Group, owners of existing office space are already struggling to find tenants, with occupancies at the newest buildings hovering around the 50 percent mark.
According to the group, the capital’s Icon Professional Centre on Norodom Boulevard has rented between 20 percent and 30 percent of its office space. The Delano Business Centre on the corner of streets 134 and 169 has managed to fill 40 percent, at a starting price of US$15 per square metre per month.
The Attwood Business Centre, located out of town near the Phnom Penh Special Economic Zone and the airport, reported 55 percent occupancy. The B-Ray Tower reported 71 percent occupancy in September and the Bo Retra 87 percent.
Of the older properties, Cambodian Priority Property Investment still had 11 percent of its office space on the market, and the Intelligent Office Centre on Monivong Boulevard 9 percent, and both the Phnom Penh and Hong Kong Centres were practically at full occupancy.
Given its relatively low quality level, Parkes said the Phnom Penh Centre’s high occupancy was a combination of the long history of limited office supply in Phnom Penh and the poor job the owners of new buildings were doing in persuading tenants to upgrade.
“The low occupancy at the new buildings is probably a result of ineffective marketing in the Cambodian real estate market,” Parkes said.
How Canadia Tower does on the marketing front will soon be evident. The original opening date of September 9 was missed, but with Canadia Bank, the building’s owner, preparing to move its retail banking operations and headquarters into the building over the Water Festival, a opening of the tower is not far away.
Canadia Bank CEO Charles Vann said recently it was talking to prospective tenants about contract details, but refused to disclose the level of interest in the building, who the company was talking to and how many contracts had been signed. He said only that the company was staying firm on its well-publicised asking rate of between $30 and $35 per square metre, “plus or minus”.
Parkes said he expected the price to soften, particularly for prospective tenants looking for long-term leases on whole floors, though smaller tenants would be looking at top dollar.
“The floor plate is around 1,000 square metres, so anyone looking for around a 250-square-metre office, or a quarter of that, will be looking at paying a premium,” he said. “But with a big multinational taking a whole floor for 10 years on level 13, 14, or 15, say, you could expect the rent to come down quite a lot, and there will probably be incentives, such as a contribution to the fit-out.”
Another key property to come on the market is the $9 million Cambodia-Korea Phnom Penh Gyeongbuk Culture, Tourism and Trade Promotion Centre (PGCT Centre) on the corner of Sothearos and Sihanouk boulevards, next to the Phnom Penh Centre.
Built by Korean company DKC&C Co, the three-storey building was due to open in July but is now expected to open its doors next month. Project manager Park Hee-chan said the asking price for office space was $25 per square metre per month but declined to say whether any contracts had been signed.
Parkes said the building was likely to be the only Grade B offering in the city, with the rest around Grade C, but that the premium rentals it was seeking appeared to be priced beyond the current market, despite the attractiveness of the site.
“The location is cracking,” he said. “It’s probably the best location in Phnom Penh. You can see the river, its near the Palace. It’s also low-rise, so not many operators will be able to claim the address.”
Canadia aims high end
That is certainly not the case for Canadia Tower, but it will always have one major advantage over its competitors, at least for the foreseeable future.
Though the building has yet to be inspected, Parkes said he expected it to be a major advancement in terms of quality compared to anything else previously seen in Cambodia. “It obviously depends on the final fitout, but it is likely to be the first grade-A office space in Cambodia,” he said.
ADDITIONAL REPORTING BY SOEUN SAY