David Simister, regional chairman of the world’s largest real estate firm CBRE, has more than 20 years experience in Southeast Asia. He sat down with PostProperty editor Liam Barnes recently to discuss the current climate of the Kingdom’s property sector, Phnom Penh’s latest flagship development Vattanac Capital and the future of investment in one of Cambodia’s pillar sectors.
• What have been the most significant changes in the Cambodian property market over the last 12/18 months?
In the last six months some real quality property has entered the market, which is attracting a new level of client. Cambodia’s economic growth has been solid in many different areas through the economy.
The increasing level of prosperity has been impressive over the last four years, with the current situation in Phnom Penh being very reminiscent of the late eighties in Bangkok. It’s now a more fundamental, healthy market and people are making much more sober decisions.
• Is it safe to say Cambodia’s property market is on the road to recovery?
Yes. If we had to pick a point when the market clearly showed an up turn, it would be the sale of the JSM sites by CBRE to Hong Kong Land last year.
• Cambodia has welcomed considerable regional investment in recent years, particularly from Korea and China, will this continue and will the Kingdom become a favourable destination for a wider range of international investors?
Yes. Chinese mainland companies are currently the dominate overseas player in major Phnom Penh and Resort development. This will in the future have a major impact in the property market and the economy. These companies are developing multi-use complexes, which are usually long-term investments rather than immediate paybacks. The investment will pay dividends down the track. There is also significant Korean investment and Hyundai completed and opened Phnom Penh Tower last year. There is also, in our view, growing regional interest. If you look at Myanmar, investors are very interested without doing much research. Cambodia is a compact country with much room to develop.
• Has there been an increase in domestic companies entering the real estate market?
Yes, the most significant and the major local development is Vattanac Capital, Grade A offices, which will open this year. With every floor that goes up, it’s very clear it’s a significantly better offering than anything else the market has seen before. It is undoubtedly the most expensive office development in Phnom Penh, but arguably also the best value. Vattanac does not have to compete with the existing stock, as it will set its own level as a grade-A building.
• Upon completion, will Vattanac prove to be a catalyst in attracting further foreign investment to the Kingdom?
Cambodia isn’t necessarily recognised on a global stage as an investment destination. But for those companies that are trading here, we believe Vattanac is the right building coming along at the right time.
Office markets evolve steadily – Bangkok went from having about 150,000 square metres of purpose built offices in 1989 to having three million square metres only three and a half years later, and still demand is outstripping supply. In Phnom Penh, we’re looking at a market where current office stock is 150,000 square metres and even with the completion of Phnom Penh Tower and Vattanac, it’s still less than 225,000 square metres. It is also important that Vattanac is completed on schedule, in order to demonstrate that this is the norm in the market and not the exception.
• Does the recent and potential supply of high-end office space justify the demand?
Demand will come mainly from multinationals. The insurance industry is a big growth sector, along with transportation, shipping, financial sector, construction industry and diplomatic bodies. There is increasing pressure on diplomatic missions to be in efficient space, rather than to work out of older properties. The rate of change from people moving out from non-purpose built office space may be slow at first, however, when they do move out, in the same way people do when buying a new Iphone, you go for the latest and best product on the market.
• How does the regional property market compare to rest of the world?
The overall local backdrop is largely positive, while the global backdrop is an area were there is a much more muted situation and there is still obviously global concerns. In terms of global real estate, we believe most markets have bottomed out. We feel there has been a floor reached in the US market. In Europe, whilst yields have moved, again we feel that the markets are relatively strong in the quality centres. Asia is certainly seen as the growth market.
• What does the future hold for Cambodia’s property market?
Many new projects will enter the market which will change people’s attitude and the type of accommodation that they take. There will be a new era of mega Chinese projects, whereas previously the large-scale projects were principally Korean. The only established market we see is Phnom Penh but watch out for the development of the resort sector. Whilst there is no boom, the property market is steadily improving in all areas.