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Tight market for new offices

Tight market for new offices

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090408_17.jpg

After years of excess demand for office space in Cambodia’s capital city, a raft of new office stock hitting the market could result in a renters’ market

Photo by: Heng Chivoan

Doeu Khemrin, general manager of construction, in front of the Icon office building on Norodom Boulevard. The building will be completed by mid-May ‘at the latest”, the developer’s financial director said.

OWNERS of six new office buildings coming onto the rental market in Phnom Penh could be forced to discount rentals after demand plummeted in the wake of the global financial crisis.

"I think those with office space for rent at this time will need to be competitive with each other to get clients," said Visal Real Estate Director Sear Chailin. "They will need to offer discounts as well as compete on things like decorations."

Many of the buildings coming onto the market were planned at the height of Cambodia's investment boom, which came to an end in mid-2008, he said. At that time, most office space in the capital was occupied, encouraging landlords to ask for rents as high as $25 per square metre as lease agreements came up for renewal.

Chun Keng, the general manager of a new office building on Monireth Boulevard in Stung Meanchey district, said he began building at the height of the property and investment boom.

"My office space building is now completed, and I have hung a sign in front of my building looking for people who want to rent office space to do business," Chun Keng said. "I know that this is not a good time for Cambodia's property market, but I hope that I can get customers to stay here by discounting rentals around 40 percent to US$5.50 per square metre."

He noted his asking prices were cheaper than in more central locations, where owners were looking for between $10 and $12 per square metre.

Sa Ry, a director at GP Real Estate, said most building owners would delay discounting prices as long as possible. "They will compete by discounting prices only if they cannot get clients," he said.

Anita Eang, the financial director of Cambodian Construction Co, the developer behind the Icon building near the Japanese embassy on Norodom Boulevard, said between 60 and 70 percent of space in her eight-storey building had been rented already.

She said she aimed to have the building fully occupied by the time it was completed in late April or "mid-May at the latest".

Eang, who also owns property developer Paragon Corporation, said she would take two floors of the building and rent out the remaining six for $15 per square metre, excluding furnishings and electricity.

The impact of the financial crisis had led to many large foreign-owned companies leaving the Kingdom, she said, but there were many smaller companies, which had been more careful with their finances, looking for office space.

While she said she was confident of renting out her building, she acknowledged so much new office stock would likely result in high vacancies across the city.

"I think that given all of the new office space that the average occupancy across Phnom Penh will be between 30 percent and 50 percent," she said. "It will not be more than this because now we have a big problem with the world financial crisis."

Ouk Sothearithy, administrative officer at South Korea's Dae Sang Construction and Development, said just 30 percent of space had been let in the company's new building opposite Lucky Supermarket on Sihanouk Boulevard, due to be completed on April 15. Space was going for $30 per square metre for the ground floor, $20 for the first floor and just $5 from the second to fourth floors, he said.

A marketing representative at the Boritra building on Norodom Boulevard, in  Chamkarmon district, said 60 percent of offices in the eight-storey building, which was completed this month, had already been let. "Some of the companies have moved in and started working already," he said.

But Mony Sokha, the managing director of a new office building on Sihanouk Boulevard, in Boeung Raing district, said the financial crisis had had a huge impact.

"We have offered a 30 percent discount to our first client, which prices the office at US$10 per square metre," he said. "It's difficult to snap up clients at the moment because we are going through such a bad time."

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