While rapid growth in Phnom Penh’s condominium market is showing signs of slowing down, one segment ripe for expansion is the serviced apartment market.
As Ann Thida, senior associate director of CBRE Cambodia, said in her presentation at the Real Estate Market & Outlook Conference (REMOC) earlier this year, Phnom Penh has the largest share of serviced apartment supply. And according to the CBRE market research, occupancy rates across the entire Phnom Penh serviced apartment market currently stands at 85.8 per cent.
The CBRE Cambodia Q4, 2015 report showed than an estimated 35,000 expats apply for permits to work in Cambodia each year. This compares to the supply of Phnom Penh serviced apartments which is currently at 6,494 units.
This market-supply imbalance is one of the main reasons price per square metre is relatively high in the capital’s serviced apartment market, compared to comparable markets in Bangkok and Ho Chi Minh.
Some monthly rental rates in the hot residential corridors of BKK and Daun Penh reach as high as $3,500 per month.
“With Cambodia being classified as a high-growth country, the rising quality of living, and increase in volume of foreign talents and tourists creates demand for quality serviced residences,” said Jeremiah Lee, managing director of Singaporean-based development company, Kingsland Global.
Kingsland will soon enter the serviced apartment sector in Phnom Penh with their One18 Residences project, nearing completion, on Street 118.
Thida notes that on a broader spectrum across the regional market, Phnom Penh has the lowest rental rates for Grade-A serviced apartments in mainland Southeast Asia, ranging from one- to three-bedrooms.
However, Sofia Perez, research and consultancy manager at Knight Frank Cambodia, says, “It doesn’t make sense to look at the serviced apartment sector in isolation, especially here in Cambodia where condominium projects can easily become serviced apartments, and vice versa.”
“The biggest distinction between the condominiums and serviced apartments in Cambodia is merely a question of ownership. Both condominiums and serviced apartment units in Cambodia are available for rent, making them indistinguishable to tenants.
Larger and more modern serviced apartments also tend to offer similar facilities and services as condominiums,” Perez said.
“Therefore, in terms of supply of residential units for rent it will be more than sufficient – especially given the future supply spill-over of condominium units coming online within the next two to three years, which at current are approximately 20,000 units provided that all launched projects are completed on schedule.”
Thida added that there is a misconception that the price will solely dictate the success of Phnom Penh serviced apartments as they come online.
Perez agrees, saying, “The more important difference is between residential condo and serviced apartment developments that are setting industry standards, versus those that are missing the mark. In this regard, I would say that there is room for good quality residential developments not necessarily only in the high-end category, but across all categories.”
Within Phnom Penh, Tuol Kork is steadily growing and will soon need a larger supply of quality serviced apartments, suggests Thida; while Daun Penh is showing particularly high occupancy rates.
Thida, nevertheless, warned developers that there are still challenges ahead for the serviced apartment market in Phnom Penh, including a lack of adequate parking space and at times poor property management.
However, if developers play their cards right, Phnom Penh’s serviced apartment market could play a big role in their pursuit of success.
In Thida’s words, “if you put the right property, at the right location and manage it well, the apartment will always have a good chance of success.”
James Whitehead is director of content at www.realestate.com.kh