The first tenants have begun moving into Vanda Tower, a new 11-storey office building with a distinctly yellow paint job in the capital’s central 7 Makara district that recognises the city’s demand for highly affordable Grade B office space.
The 16,000-square-metre building, which consists of 11 floors of office units and a basement parking garage with space for 50 cars, is located approximately 500 metres west of Central Market. Introductory rental rates run between $10 and $14 per square metre, making it among the least expensive Grade B office buildings in the vicinity.
Heng Piseth, manager of Vanda Tower, said the decision to develop the previously unoccupied lot into a Grade B office tower was two-fold.
“There are two reasons that we didn’t build a Grade A building,” he said. “One is because we had a limited budget, and two because there is already too much Grade A office supply in Phnom Penh.
“If we build a Grade A office building, it will be hard to lease the units because there is an oversupply in the market,” he said, adding that Vanda Tower has already signed contracts for 60 percent of its leasable space.
Grant Fitzgerald, country manager of real estate firm IPS Cambodia, said developers have shifted away from building Grade A office buildings toward the undersupplied Grade B segment of the market.
“The last few years have seen a lot of new Grade B projects come online, and with the capped demand for Grade A space, it’s only natural for developers to start looking at other segments of the market to service.”
Grade B office buildings allow companies to make significant savings over Grade A buildings, where rents can run as high as $30 per square metre.
New projects with rents at the low end of the Grade B price spectrum have proved particularly popular and filled up quickly with SMEs and start-ups, according to Fitzgerald.
“The Cambodian real estate is still very price sensitive, so I think there will always be demand for smartly designed properties at a budget price,” he said.
Vanda Tower is owned by Heng Vanda, founder of the Vanda Institute of Accounting.
One of the building’s first tenants is Limkokwing University, which is relocating its campus from Sen Sok district. The new campus will occupy three floors of Vanda Tower, covering a total of 4,000 square metres and accommodating up to 1,500 students.
The first term in the new building is scheduled to start on May 7, according to Monirul Islam, the university’s rector.
“Limkokwing University is changing its locations because it wants to be located in a central area of Phnom Penh,” he said. “The new campus will be very convenient for staff and students who live in Takhmao and Chroy Changvar districts.”