Monthly Archives: March 2012
The Ford Motor Co announced yesterday that it has begun assembling the 2012 Ford Everest SUV in Cambodia and has started selling the SUVs domestically, marking the first assembly of a retail vehicle here by Ford.
The first car off the assembly line was purchased by Prime Minister Hun Sen, Ford and its local partner, RMA Cambodia, said in a statement.
“In support of Ford and RMA Group’s contribution to Cambodia… Prime Minister Hun Sen has purchased the first Ford Everest to come out of the assembly plant,” the statement said.
MA Cambodia CEO Rami Sharaf said during the conclusion of the US-Asean Business Council summit in Phnom Penh that the decision to assemble the Everest in Cambodia was made after a personal plea by Mr. Hun Sen.
Production of the Everest began in December last year in a temporary factory in Sihanoukville, but RMA Cambodia is planning to open a $3 million assembly plant in the Sihanoukville Special Economic Zone this year to assemble the Everest, Ford’s Asia Pacific regional manager David Westerman said.
“We saw a strategic opportunity where the Cambodian market is growing and we see great potential here,” Mr. Westerman said. “We trained the Cambodian staff to ensure that the quality of what is produced here is identical to elsewhere”.
Mr. Westerman said the vehicles would be assembled from imported parts from a Ford plant in Thailand, and that engines would arrive already assembled.
“Engines are imported because [the assembly] is very high-tech and complicated and we’re not ready,” said RMA Cambodia deputy country manager Ngorn Saing, adding that the plant employs 47 laborers.
“We’ve produced 42-Everest so far, and our objective is to reach 150 units this year,” he said, adding that the first ford SUV was assembled in December.
Mr. Westerman said that he hoped the lower cost of the vehicle-which ranges from about $46,000 to $56,000- as a result of local production would increase Ford’s new vehicle market share here, which currently lags behind Toyota’s. He also said that it was possible other Ford models would be assembled in Cambodia in the future.
Ford is the third international firm to join with a local partner to assemble vehicles in Cambodia. Last year, Cambodia-and Korea-owned Comko Motor Company opened a plant in Koh Kong to assemble Hyundai vehicles. Despite its goal to produce 1,000 vehicles annually, Camko Director Lim Visal said local demand continues to be a challenge.
“Sales volume has seen steady growth, but still the scale is very small for an assembler,” Mr. Visal said. “We can handle a lot more it’s not efficient.”
The rehabilitation of Cambodia’s dilapidated railway network is nearly six months behind schedule, and with more than a year’s worth of work to do, the project is running out of money, a consultant for the Ministry of Public Works and Transport said yesterday.
Paul Power, a consultant on the railway project hired by the ministry, said yesterday that the 600 Km rehabilitation project was now in doubt. He added that it would likely cost between $50 million and $100 million to finish, on top of the $140 million already sunk into the project by the Asian Development Bank (ADB) and the Australian Agency for International Development.
“We are collectively working to see just how much it will cost and where it will come from,” he said, adding that the government and the project’s backers had underestimated how much of the original tracks could be salvaged.
Chinese President Hu Jintao will pay an official state visit to Cambodia between March 30 and April 2, a trip that will coincide with the Asean European Union Business Summit and will finish just one day before the annual Asean summit commences in Phnom Penh, an official at the Chinese Embassy said yesterday.
Mr. Hu is scheduled to arrive in Cambodia after attending a nuclear security summit in Seoul and an emerging market economic meeting in New Delhi.
“He is arriving by invitation from King [Norodom Sihamoni], and he will meet with Cambodian leaders and [members of] the Senate and Assembly,” Chinese Embassy spokesman Yang Tian Yue said. “He will come to enhance the bilateral relationship [with Cambodia] and to support cooperation between China and Asean Countries.”
Mr. Hu, who will step down as communist Party chief later this year at the end of a 10-year mandate, will visit Cambodia as hundreds of delegates from countries in the region arrive for the beginning of the 20th Asean summit. In previous visits to Cambodia, Chinese officials have used meetings with senior officials here as platforms to announce large amounts of aid and loans.
A statement from the Ministry of Foreign Affairs yesterday said that Mr. Hu and Prime Minister Hun Sen would “preside over the Signing Ceremony of some documents,” but the ministry did not specify what those documents would consist of.
Cambodia’s Ministry of Tourism is projecting sizeable growth for the industry this year, according to Director General Tith Chantha.
Pointing to the about 28 percent year-on-year increase in visitors in January, he said the ministry has estimated the rest of 2012 would enjoy a similar upward trend. “The jump [in January] will lead our total for the year to increase at least 20 percent.” he said. Tith Chantha credited the rising figure to greater flight connection with ASEAN countries. However, Ho Vandy, co-chair of the Government Private Sector Working Group on Tourism, said any number of factors could affect the Kingdom’s tourism industry, not the least of was economic troubles in Europe, and as a result there was no guarantee the ministry’s target would be reached. “It could be wrong or right because many issues are occurring now,” he said.
In a ceremony at the Ministry of Foreign Affairs and International Cooperation yesterday, the Japanese government officially granted aid of 974 million yen (about US$12.2 million) to the Cambodian government.
The Honorable Masafumi Kuroki, Japanese ambassador to Cambodia, said his country had made the donation to help accelerate economic and social development in Cambodia in order to improve the living standards and welfare of its people.
The funds will be focused on two specific areas of spending: health and transport infrastructure.
The upgrading and renovating of medical equipment and supplies at hospitals both in Phnom Penh and the provinces will account for $ 4.7 million of the total, while the remaining $7.5 million will be spent on bridge and road renovation, repairing the damage caused by floods in 2011.
“I believe that these two grants will contribute to the economic and social development of Cambodia,” the ambassador said at the ceremony, adding, “I sincerely hope that they will also strengthen the friendly relations between Japan and the Kingdom of Cambodia.”
A Casino complex on top of Kampot province’s Borkor Mountain will open in less than two weeks but the development itself is the size of a small city.
The complex, in the Preah Monivong National Park, includes a casino and hotel and would have a “soft opening” late this month before an official opening mid-year when construction was completed, Thansur Bokor Highland Resort chief executive Dr. Ngin Banal said.
“Our primary target market is the greater Mekong region, including Cambodia, Vietnam and Thailand. Our secondary market is southern China and Korea,” he told the Post this week.
In January 2008, the government granted the Sokha Hotel Group, owned by Sokimex Investment Group, a 99-year lease for the US$1 billion development.
Based on the original plans, the project will also include a 700-room, 18-storey, Five-star hotel, as well as conference rooms, bars, wedding facilities and two Arnold Palmer-designed golf courses.
“The group envisions that in the next 15 years, the original sky city, which consisted of eco-tourism, commercial and residential areas, will be fully restored in full compliance of the approved master plan by the Royal Government of Cambodia,” he said.
Prices in the Kingdom rose 5.4 percent year-on-year in February, as fuel costs continued to push inflation higher, according to data from the National Institute of Statistics released yesterday. Foodstuffs, however, saw declines following demand that was driven by Chinese New Year, though paddy prices were still high. The increase in inflation from January was just 0.4 percent, the NIS reported. Earlier this week, Minister of Economy and Finance Keat Chhon called on consumers to limit their gasoline consumption as the best method of dealing with the high costs, until those costs subsided. The gasoline price rose to US$1.44 a liter for gold this week from $1.33 on December 31, a jump of 8.3 percent, according to Ministry of Commerce statistics.
The residential market in Cambodia is dominated by three main categories of housing; apartments/ condominiums, shop houses / townhouse / and villas. The residential market involves us all and we therefore all have our own opinions about it. The residential market can be very challenging for developers and investors. At the same time, the residential market in Phnom Penh is a healthy market with average house prices steadily increasing.
Villas are marketed for sale with two components, firstly land and secondly the built component of the dwelling itself. Almost all of the villa developers sell land plots with the option to build houses either at cost or at a small margin. Purchasers are able to buy the land and then hold off on construction until they are ready.
As with all property, location is key to a building’s value and villas located in popular parts of Phnom Penh are very valuable. In Boeung Keng Kang there is a diminishing supply of villas because properties are being converted into commercial units. CBRE Cambodia has recently had some real success with linking up national and international purchasers with good quality villas.
A condominium, also referred to as an apartment, is a single floor or duplex unit within a multi-storey building. There is a shared roof, common facilities and a common access. The market for condominiums is still relatively small and in an early stage. This is set to grow in the future and it is likely to follow the markets in Singapore and Ho Chi Minh City in time.
The market for renting apartments is somewhat larger and this can sometimes lead owners and developers to the thought that anything they bring to the market will be a success. This is not true and developing and apartment building is a complex undertaking and it is vital that the design, size, type, facilities and specification are in line with their target market and importantly, priced correctly. The optimal mixture of one, two and three beds along with penthouses to suit the market is also vital in larger developments. The style and design of the apartment also needs to reflect the needs of the intended market, for example, should a western style kitchen be planned for and installed, or is a more traditional Khmer kitchen more appropriate. Phnom Penh accommodates a diverse range of expatriate nationalities, a developer should be acutely aware off their target audience. One size does not fit all and is a pit-fall some developers fall into.
An area where CBRE Cambodia is frequently consulted on is the marketing of apartments. It is here that we are able to build on the knowledge base of over 300 offices worldwide. It is essential to create the right marketing plan for a specific building and this may include launch parties, press events, brochures, website, web-based and e-mail advertising campaigns, advertisement boards and additional bespoke marketing materials and activities.
A shophouse or townhouse is a dwelling attached on a minimum of one side but could be two or three sides. It is usually multi-storey and has no private external areas. It’s typical dimensions are 4.2m wide by 16m or 20m deep. These are very popular with Cambodian nationals as they allow people to have a small commercial space on the ground floor and residential accommodation above with can be used as a residence or rented out.
Shophouses are flexible and relatively cheap to rent, which is why they are so sought after. The unit price of a shophouse/townhouse is equal to or cheaper than the average condominium, which makes it more affordable. Some units are being sold for as little as US$40,000, although often the interior is basic without a fitted kitchen or bathroom and sometimes with screed floors and only a concertina door.
The residential property market is a fascinating part of the property market but it should be treated with caution.
David George, Country Manager CBRE Cambodia and a member of the Royal Institute of Chartered Surveyors. email@example.com
An increase in agricultural trading has caused the value of the US dollar to dip below 4,000 riel in the past three consecutive days, as there is now a higher demand for the Cambodian riel, money exchangers and an official from the National Bank of Cambodia said yesterday.
Nguon Sokha, director-general of the National Bank of Cambodia, said that the high demand for riel is seasonal, and often comes at the same time as farmers and agricultural traders flood into the city to trade their products.
She also rejected that external impacts, such as the current weakening of the US dollar or the European sovereign debt crisis, were the cause for the dip.
“[The drop] is actually due to the outcome from the agricultural sector. This is the time when farmers are selling their produce, so they have to trade in riel,” said Ms. Sokha, adding that the value should return to normal, which is above 4,000 riel, after the Khmer New Year in mid-April.
“If it goes to 3,800 [riel], then it is quite low. Normally, the fluctuation is between 3,900 to 4,100 [riel],” she said. “We will not intervene unless if something drastic happens… Right now, we think it is stable.” A survey yesterday of the money exchangers located around Phnom Penh’s central market showed the dollar being sold at 3,997 riel.
A manager at Ly Hour Money Exchange, who declined to be named, said that this dip is normal. “It fluctuates only during harvest season, starting from December until the end of March,” she said.
Taing Rada, a money exchanger, said there has been an increase of people coming from the provinces to trade rice, corn and cassava, which requires the Cambodian riel. He anticipated the dollar value to drop to 3,900 riel.
“[The drop] will affect farmers and factory workers,” said Mr. Rada. “They will find it hard to buy things and food because while the dollar drops, the [price of] goods on the market do not drop.”
Kang Chandararoth, director and head of the economics unit at the Cambodia Institute of Development Study, cautioned that because Cambodia has so many imported goods, a continued lull in the dollar’s value would cause an increase in prices of imported products, which would lead to inflation.
“It could be seasonal… but I think it’s still very risky for [the] Cambodian market economy. We should be very cautious not to let the dollar weaken because that can cause inflation,” said Mr. Chandararoth.
Cambodia has a total of 505,134 businesses supported by a workforce of 1,676,263 just 11.56 percent of the total population, according to a nationwide economic census released yesterday by the Ministry of Planning.
Of the total number of people employed in the country, 1,026,084 or 61.2 percent, are women, mostly working in low-end jobs in the food service, retail and garment sectors, the 2011 Economic Census found.
According to the census 97.7 percent of all businesses in Cambodia are classified as micro-businesses with less than 10 employees, while 79 percent of all businesses have fewer than three workers. Large businesses, on the other hand, classified as having more than 100 employees, account for just 0.2 percent of the total, or 787 establishments.
When it comes to sales, however, those large businesses account for nearly half of Cambodia’s $120 billion sales annually, at $58.5 billion a year, while those businesses with fewer than three employees accounted for just $3.9 billion in sale output.
Conducted in March 2011, the $3.26 million, door-to-door economic census was funded mostly by the Japan International Cooperation Agency and was tasked with identifying the number of businesses in Cambodia and gathering economic data about those businesses.
“The 2011 Economic Census [of Cambodia] was carried out covering all villages or enumeration census areas and markets located in all districts, khans, communes, sangkats in the territory of Kingdom of Cambodia,” Minister of Planning Chhay Than said yesterday morning at the launch of the census.
The census also shows that wholesale, retail and motor vehicle repair establishments represent 57.2 percent of all businesses in the country, at 289,130 while businesses in manufacturing, accommodation and food services comprise 14.9 and 13.8 percent of the total figure, respectively.
According to the findings, manufacturing, accommodation and food services accounted for 86.7 percent of the 181,035 new businesses established in the country since the beginning of 2009. In the same period, businesses focused on information and communications-mobile phones and Internet-grew by 52.4 percent to 4,708.
The census found that more women are employed by businesses than men, and it also found that more businesses are owned by women, with women controlling 65 percent, or 326,006, of the total. More than 64 percent of all businesses are also still run from residential homes.
Phnom Penh Contains the largest number of businesses, with 95,848 or 19 percent of the total figure, located within the city’s limits, while the next largest numbers of businesses are found in Kompong Cham, Kandal, and Battambang provinces with 11.1 percent, 8 percent and 6.8 percent of the total number.
A South Korean government agency and Korean investors in CamKo City are locked in an ownership dispute at the Phnom Penh Municipal Court over the half-built residential development project in Russei Keo district, according to court documents obtained yesterday.
Following the collapse of the Bunsan Saving Bank amid a fraud scandal just over a year ago, progress on two major developments in Cambodia that were funded by the bank-CamKo City and a proposed $1 billion Siem Reap airport project has halted. The CamKo project is still only partially built, although some residents have moved into its high-rise apartment blocks.
When Busan Saving Bank filed for bankruptcy, the Korea Deposit Insurance Corporation (KDIC), a government agency, bailed it out. The KDIC is now attempting to recoup money investment in Cambodia through fraudulent loans made by Busan.
Last month, Lee Sang-ho, CEO of World City Co, the firm behind the CamKo development, was sentenced to five years in jail in Seoul for fraudulently obtaining loans from the Busan Savings Bank. Although Mr. Lee is appealing his conviction and denies any wrongdoing in obtaining the loans for his project in Russei Keo, the future of CamKo and the matter of who will be the long-term owner of the project are now in doubt.
The long awaited first security listing on the Cambodian Securities Exchange became a reality on February 23 with the Securities Exchange commission of Cambodia’s “in principle” approval of Phnom Penh Water Supply Authority’s (PPWSA) “disclosure document for public issuance of equity securities”.
This is effectively a preliminary prospectus that includes information on the company such as its history, operations, management and financials as well as the terms, proceeds use, timetable, and risk factors of the offer.
Tong Yang Securities (Cambodia) Plc, an overseas affiliate of South Korea’s TongYang Securities Inc, will act as sole underwriter, book runner and lead manager. An initial public offering, also referred to as a primary offering, is first sale of a company’s shares to investors on a public exchange. PPWSA intends to issue 13.04 million ordinary shares with a par value of 1000 riels.
This represents a 15 per cent float will be allocated to the company’s employee stock option plan. The state, represented by the Ministry of Economy and Finance will retain 85 percent ownership or 73.9 million shares.
The role of the underwriter is to file the registration documents, advise on the IPO pricing, sell and distribute the securities, position and market the company, and purchase all the securities to be offered from the issuer under a firm commitment, which is the case of this offering. Book Building is the process of recording investor demand and the price the investor’s are willing to pay. For PPWSA offering, this began on February 29 and ends March 13. Interested investors must submit a book building form indicating the quantity of shares desired and a bid price, which must be in the range of the indicative offering price. A 10 per cent deposit is required based on the total equity value of securities that prospective investor has bid for.
The indicative offering price is US$1.00 to $1.57. The final offering price will be determined by the underwriter and issuer, using the weighted average method based on the price and the quantity of securities that investors have selected and indicated in the book building form. The Cambodia Securities Exchange and Securities Exchange Commission must approve the final offering price.
Successful bidders will be informed by the company and may subscribe for a quantity of securities in which they bid, or a larger amount with an additional deposit, during the subscription period. Subscription can be made through designated branch offices of ACLEDA Bank and ACLEDA Securities, the selling agent for the underwriter. There is a reserve of shares for unsuccessful bidders and investors who did not subscribe during the book building process.
The prospective listing date in April 18, and secondary market trading begins thereafter. PPWSA intends to pay a dividend.
PPWSA is forecasting revenues of $28.3 million for 2011, up from $26.2 in 2010. Net profit for 2009 was $6.4 million and was $7.2 million in 2010. The Company expects to continue to expand its services coverage, increase production capacity, reduce its water losses, and grow its customer base. PPWSA is a monopoly supplier. Proceeds from the offering will be used to repay loans from the World Bank, CAPEX, business expansion and working capital.
The prospective price-earnings ratio is between 11 and 18, in line with other water utilities around the world – a very exciting time for the Kingdom’s evolving capital markets.
The first phase in the construction of the Phnom Penh-based Borey Peng Huoth, ‘The Star Platinum’ housing development was recently concluded, with completion of the entire project slated for the second quarter of 2013.
Construction is now underway on the second phase, which will comprise 550 mixed units, according to sales manager Ouk Thavy.
“We started the development in early 2011 when the market started to show signs of improving, and now sales are picking up by the day,” he said.
About 70 per cent of the properties of the properties in phase two have already sold- exclusively to Cambodian nationals, according to Ouk Thavy.
Properties in the second phase, of which 60 per cent has been completed, will be priced between US$83,500 and $580,000.
In addition to the Star Platinum development, Borey Peng Huoth investment group has completed four more housing projects in the last seven years, namely the 500 until Toul Sangke and 200 unit Stung Meanchey projects.
“We built these new housing developments to respond the growing demand in the Kingdom. So far, sales have gone smoothly,” Ouk Thavy said.
She added that the quality of the construction and the facilities offered, such as gymnasiums, swimming pools and onsite shopping markets, continued to attract new clients.
Some members of the sector have welcomed the entry of additional residential options in the capital.
Chheng Keng, director of real estate company Cambodia Property Limited said the success of Borey Penh Huot’s latest projects showed its understanding of the current climate of the market.
“The quality of the construction and the sale prices are in line with the rest of the market, allowing it to attract a wide range of clients.”
HO CHI MINH CITY- The head of major Japanese supermarket chain operator Aeon Co revealed in early March plans to invest about $1.5 billion over the coming decade to open shopping centers and stores in Ho Chi Minh City and elsewhere in Vietnam.
Motoya Okada, Aeon president and chief executive officer, made the remarks at a news conference in Vietnam’s southern metropolis to discuss the Aeon group’s expansion plans in Vietnam and Southeast Asia.
Firstly, he said, the company plans to open in 2014 the Aeon Tan Phu Celadon Shopping Center, to be built in Celadon city in the thriving Tan Phu district, about 7 km west of downtown Ho Chi Minh city, with about 130 specialty retailers.
Last October, Aeon acquired an investment license for the shopping center project from Ho Chi Minh City authorities and set up a local corporation, Aeon Vietnam Co, Capitalized at $101 million.
Okada said Aeon plans to expand to 20 stores nationwide by 2020, though the initial focus will be on Ho Chi Minh City.
The retailing group of some 180 companies has adopted a “shift to Asia” strategy in its three-year medium-term management plan, commencing in 2011, as the Asian market is forecast to grow significantly in the near future, in contrast with that of Japan.
The Group’s companies have joined forces in a consolidated effort to expand business rapidly in China and Southeast Asian countries like Thailand and Malaysia where Aeon has outlets including general merchandise stores, supermarkets and convenience stores.
In addition, group companies including financial service operators, specialty store companies, service operators and others are accelerating overseas expansion.
Bilateral trade between Cambodia and Hong Kong rose more than 22 per cent year-on-year in 2011, according to data from the Hong Kong Trade Development Council, whose regional base is in Hanoi.
Total trade was US$741 million, compared with $607 million in 2010. Cambodia’s exports to Hong Kong grew more than 90 per cent to $42 million, from $22 million two years ago, and imports from Hong Kong grew 20 per cent to $698 million.
Experts say this growth has been caused by the improving state of the economies of both countries. “Because our economy is improving, we can produce more to export,” Ministry of Commerce director-general Sok Sopheak said.
He said trade with Hong Kong was often cheaper than with other ASEAN countries as Hong Kong did not impose high taxes on imports. Improvements in Cambodia’s garment and textile industries had brought more investment from Hong Kong as well, Cambodia Chamber of Commerce director-general Nguon Meng Tech said. “After setting up garment factories here, they can enjoy duty-free benefits from our export markets,” he said.
Rising labor costs in China had also contributed to Cambodia’s economic growth and increased bilateral trade, Business Research Institute for Cambodia CEO Hiroshi Suzuki said.
“With recent wage increases in China, many factories have shifted production to countries like Cambodia. Because of these developments, it follows that trade between the two countries will increase,” Suzuki said.
Following this trend, increased foreign investment and trade could also come from mainland China, Taiwan, Vietnam and Thailand, he added. “I hope the Cambodian government and private sector can grasp this big investment-shift opportunity.”
Land available for sale 2,212 sq.m plot with fantastic development opportunity in an up and coming area of Sihanoukville.
Situated with road frontage. Road has planning for infrastructure improvements widening to 35m.
Close proximity to Oucheteal Beach and the Golden Lion Roundabout.
Located on a hill side with potential development having panoramic views of the sea.
The real estate sector is a key driver in the growth of the Cambodian economy with construction approvals having increased by 158 percent in 2011. In order to facilitate more investment, an open and transparent property market is crucial. Land and property valuations provide fundamental foundations in creating a trusted real estate market, which will ultimately lead to an environment which encourages investment. Inflated or inaccurate values have the opposite effect, creating mistrust and risk, which negatively impacts investment levels.
With the advent of the Cambodian Stock Exchange, companies which intend to list are likely to require an independent valuation of their property assets within their listing documentation, as properties form a significant component of company assets. An accurate valuation is crucial to determine the correct offer price on the stock exchange.
The Royal Institution of Chartered Surveyors (RICS) is a professional body that sets the bar on professional valuation standards, ethics and practice standards, as well as providing guidance and rules to be adhered if one wants to become and remain a chartered surveyor. These standards are mandatory for any company regulated by RICS and ensure strict professionalism and standards in the delivery of accurate valuations and valuation reports.
To implement these standards, professionals look to become a member of the Royal Institution of Chartered Surveyors as a testament to their professionalism and ability to perform valuations to the highest technical and ethical standards. To become a member of the Royal Institution of Chartered Surveyors the process requires a minimum of 24 months professional experience in the industry, examinations by a board of chartered surveys selected by RICS and a number of other testing criteria. The CBRE Cambodia office has two highly experienced British Members of the Royal Institute of Royal Surveyors, David George MRICS and Ryan O’Sullivan MRICS and two surveyors currently in the process of becoming chartered surveyors. CBRE’s Regional Chairman, David Simister is a Fellow of the Royal Institution of Chartered Surveyors (FRICS) a testament to his knowledge and experience.
Due to the current lack of professionally trained surveyors and valuers within Cambodia, a key area of focus will be training local staff in the skills of international standard valuations and it is a goal CBRE are focused on achieving. The Royal Institution of Chartered Surveyors have provided their guidance to the Cambodian Government which has been welcomed but ultimately it is up to the professionals within the real estate sector to adhere to international standards in valuation so that the Kingdom of Cambodia, individuals and companies can all benefit from high caliber, ethical, standard and professional valuations.
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 Post Property 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 favorable destination for a wider range of international investors?
Yes. Chinese mainland companies are currently the dominated 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, investments are very interested without doing much research. Cambodia is a compact country with much room to develop.
Has there been and 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 for the Kingdom?
Cambodia isn’t necessarily recognized 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 having about 150,000 square meters of purpose built offices in 1989 to having three million square meters 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 in 150,000 square meters and even with the completion of Phnom Penh Tower and Vattanac, it’s still less than 225,000 square meters. 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 maybe 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 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 project will enter the market which will change people’s attitude and the type of accommodation that the 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 she 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 area.