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Latest property reports offer evidence of strong growth

Developments like De Castle Royal have restored market confidence, according to CBRE.
Developments like De Castle Royal have restored market confidence, according to CBRE. Scott Howes

Latest property reports offer evidence of strong growth

In its latest Market View report, CBRE Cambodia Research concludes that Phnom Penh has well and truly put the fallout from the Global Financial Crisis – which saw many condominium developments in the city put on hold or even fail – behind it, and the city is now responding to demand for Grade-A serviced apartments.

According to the March 2014 report, 507 serviced apartment units came on line in Phnom Penh last year, and a further 170 will arrive this year, with 20 condominium projects either completed or under construction.

“Signs across all key Phnom Penh real estate sectors are positive, with new levels of quality set to be delivered to the office, retail and residential markets,” says Chris Hobden, surveyor at CBRE Cambodia.

“Serviced apartments continue to benefit from high levels of demand, as demonstrated by the low vacancy rates in established buildings,” the report says, noting that demand is particularly high for studio and one-bedroom apartments “in popular residential areas, such as BKK and Daun Penh”.

The CBRE report also points to increased demand from “both Japanese and Chinese investors, driven primarily by anticipated capital growth in residential assets, rather than rental income.”

The declining trend in condominium developments in the aftermath of the 2007-8 economic downturn has now reversed, the report says, adding that confidence appears to have been restored to the market due the successful implementation of off-plan developments such as De Castle Royal, which is slated to open later this year and is already 90 per cent sold out.

“Sales of condom-iniums in Phnom Penh have traditionally been marred by publicised failures of developments that have been sold off plan and have subsequently ceased construction.”

De Castle Royal, according to the report, is only the most successful of a slew of condominium developments that have turned that trend on its head and are seeing investors return to Phnom Penh, with completed projects seeing “a notable high in sales rates of 80 per cent”.

The report adds: “Significant interest from international purchasers has helped to drive sales, with the ratio of domestic to foreign buyers as high as 65:35 in some buildings.

“De Castle Royal has been successful in attracting significant foreign interest, due both to the calibre of the building and the strong rate of return that investors can expect to achieve, although capital growth remains a priority for many.”

Meanwhile, CBRE’s February Market View report on the retail sector was similarly upbeat, citing a forecast 23 per cent increase in supply this year.

Notable developments in Phnom Penh’s retail sector, the report notes, are the imminent arrival of Aeon Mall, which is set to open in the middle of this year, and Parkson City Centre, which will open early next year.

Aeon will occupy 58,000 square metres of net retail space, while Parkson will add an additional 70,000 square metres to Phnom Penh’s retail market, marking what the report refers to as “a continued transition from traditional markets to international-quality, purpose-built shopping centres and department stores.”

“The next 12 months will see a wave of new brands entering the Phnom Penh retail market. Both consumers and retailers alike will benefit from a diverse mix of tenants in new, high-quality shopping centres.”

Vattanac Capital Tower will add another 5,000 square metres of retail space (over three storeys) to the market in coming months, while late last year saw the arrival of TK Avenue in Phnom Penh’s Toul Kork area, with a total net retail space of 7,000 square metres.

“There has been an increasing demand for luxury products, or at least mid-tier brands, in Phnom Penh,” the report says, adding “change is being driven by a combination of positive GDP growth, an aspirational middle class and a young demographic, with an increasing disposable income.”

A January report by CBRE on office space, forecasts a 23 per cent increase in supply, driven largely by demand by multi-national corporations.

That equates to approximately 52,000 square metres of new supply by year-end, with 17 per cent of the total accounted for Vattanac Capital alone, according to the report.

“The highly anticipated 39-storey development [Vattanac], opens 23 storeys of prime location, Grade-A office accommodation in May 2014, setting a new precedent for future developments, bringing confidence to the expanding sector,” the report says.

“With continued year on-year GDP growth, considerable levels of foreign investment and a domestic population whose disposable income is to set increase significantly over the coming years, the overall outlook for the Phnom Penh real estate market looks encouraging” Hobden says.

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