An oversupply of commercial property in Phnom Penh threatens to scupper the redevelopment

plans for one of the capital's prime real estate sites.

After being abandoned for nearly a decade, the eight-storey building on Sothearos

Boulevard, between Hun Sen Park and the Russian Embassy, was slated for redevelopment

after a clean-up drive by the municipality. Surrounding squatter housing was cleared

away, and the owners planned to turn the building into Phnom Penh's first high density

commercial district.

Although the owners said they had received some inquiries, no takers have yet emerged.

Real estate agents are not surprised . They said that many smaller commercial complexes

in the city had been unoccupied for months and that to expect large scale investment

in such a huge project was unrealistic.

One of the four partners who bought the building in 1992 would not divulge how much

money they had spent so far or what their redevelopment plans were - if any - now

that the municipal government has unlocked the building's prospects.

$20 million tag

"I and one of my Thai partners have spent a lot of money [on this building].

We would like to sell it for $20 million, but it is very difficult to find a customer

who can afford to buy it," the investor said.

More than 8,000 square meters of commercial space in two semi-finished apartment

blocks is available. The owners are offering ground floors for shops and showrooms

and office space on the upper three floors.

Sok Lakena, deputy chief of the cabinet in the municipality, said it was the Kingdom's

first condominium project, built in the early sixties as an upmarket residential

address for expatriates and senior civil servants.

"At that time, it was known as the 'Gray Apartments'. It was well furnished,

had a big parking lot and greenery all around," he said.

The blocks were re-occupied by Ministry of Culture employees after the Khmer Rouge

era. Lakena said the building was subsequently sold to a group of four private investors,

three of them from Thailand, who paid each ministry employee $18,000 to vacate the

premises in preparation for its conversion into a commercial center.

The apartments were stripped down; only the superstructure was retained for the revamp.

However, political upheavals and the 1997 Asian economic crisis forced them to abandon

their plans, and a mushrooming slum cluster and red light district nearly sealed

its fate.