A NEW US$3 million tower in Phnom Penh may be put up for sale if the building’s rental potential is not reached, its managing director told the Post on Wednesday, following a lack of demand for the office space.
Construction began on the eight-storey K-Tower, located on the corner of Russian Boulevard and Street 257, in 2007. It is set to be completed next month.
But Managing Director Keo Wanna told the Post on Wednesday that he would consider selling the block for $3.5 million if he cannot make the most of the rental market.
Despite having announced last week that the space was up for rent, he has not accepted a single client. Instead, he is holding out for offers from big businesses that can rent whole floors at a time.
“As Cambodia’s real estate sector is in a downturn, the rental market is very quiet,” he said.
“Since we announced the space was available for rent last month, we did get a lot of potential clients – but they were only focusing on small spaces of around 100 square metres.
“We don’t want to take them to rent our place. We need big clients who want to rent a floor or more.”
As Cambodia’s real estate sector is in a downturn, the rental market is very quiet."
Space in the tower is available for rent for $13 per square metre, which includes a security and cleaning service. Keo Wanna said it could provide a good base for bank operations, showrooms or stock broker offices.
He added that the location – opposite the Cambodian Chamber of Commerce in the capital’s Toul Kork district – would be a good base for foreign companies because of a lack of traffic in the area and a negligible risk of flooding.
Space also lies empty in another Phnom Penh landmark – the Canadia Tower, Cambodia’s tallest building – due to a lull in the rental market.
Su Si, director of Mega Asset Management Co, which owns the Canadia Tower, said: “Nowadays, it is very quiet on the market. We’ve got only two big companies, iOne and Canon, to rent our ground floor.”
She explained that potential clients are demanding cheap prices of around $6 to $7 per square metre, despite the standard rate for a metre of space being around $25 – a $3 to $5 discount on the initial rental rate marketed.
“We cannot rent to them because our place is an international standard,” said Su Si, before adding that the company is now offering a 30 percent discount for customers who agree to rent space for one year.
According to Canadia Tower’s brochure, it has 12 floors of offices available for rent, which represent just over 10,724 square metres of prime work space. Were Canadia Bank able to secure full occupancy, this would represent about $3.22 million in rental revenues per year at $25 per square metre.
Were Canadia to accept tenants at the lowest rate it is being offered – $6 per square metre – it would therefore lose close to $2.5 million in office rental revenue per year, a staggering sum and a sign of persistent low demand in the property sector.
Last month CB Richard Ellis Country Manager Daniel Parkes predicted that demand for office space would grow within the next five years, however he also projected that available office space in the capital would almost double by 2013 based on the current projects underway.