置地公司的“Exchange Square” 商业综合体开发项目将于第二季度完成上层建筑，并于2016年第四季度全面完成。
US$1.65bn invested in construction over Q1, compared to US$448m in Q1 2015, representing a significant Y-o-Y increase of 267%.
Hongkong Land’s mixed-use development, Exchange Square, due to top out by Q2, with overall completion set for Q4 2016.
Average sales and rental prices broadly appreciated over Q1, with the exception of shopping mall rents, due to challenges faced by ageing retail stock in the context of upcoming supply.
Sorya Shopping Center, one of Phnom Penh’s first purpose built shopping malls, announces renovation and rebrand as ‘Sorya Center Point’.
4,158 condominium units, across 8 buildings, announced over Q1.
On Thursday, 21st April, 2016, Hongkong Land, DFDL and CBRE Vietnam were organizing a special event about “Doing business in Cambodia” at Park Hyatt Hotel, Saigon (Ho Chi Minh City).
CBRE honored to present about Cambodia Market Outlook and the overview of the Retail Real Estate Market in Q1/2016. DFDL will also share the legal update for investing and doing business in Cambodia.
Central Phnom Penh enjoys broad rise in values
Strong take-up across new mid-rise office developments continued over Q4, 2015.
Hongkong Land’s mixed-use development, Exchange Square, comprising approximately 18,000 sq.m of office and 8,000 sq.m of retail space, continues construction, with completion on track for Q4, 2016.
Total of 689 condominium units, across 5 projects, announced during Q4, bringing the total number of off-plan condominiums launched over the course of 2015 to 7,014 across 26 buildings.
Total of 5 developments, comprising strata-title office space for sale off-plan, announced over the course of 2015.
Strata-title office space to account for approximately 25% of total office stock by 2020.
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INTERNATIONAL BRANDS DRIVE PHNOM PENH RETAIL DEMAND
Phnom Penh’s retail market continues to benefit from new international entrants, with food and beverage, fashion, accessories and cosmetics retailers driving demand for both shopping centre and high-street retail space. Q2, 2015 sees Aeon Mall, the country’s first international shopping centre, mark one year of operations. Whilst a number of retail groups have sought to reposition their brands within the centre, Aeon has maintained a commitment rate of 100% since launching at the end of Q2, 2014.
Although minimal retail supply is set to come on-stream over the course of 2015, with only the retail podium at Sokha Hotel delivering 1,020 sqm of leasable space in Q1, 2015, supply over coming 3 years is set to increase significantly, from to 214,520 sq.m to 455,348 sq.m by end of 2017, representing an overall rise of 112.26%. The growth in supply can be attributed to the delivery of new shopping complexes, such as the Parkson’s Phnom Penh City Cente, due to contribute 57,000 sq.m in Q2, 2016, and the rise in large-scale, predominantly residential schemes with plans to incorporate notable retail components, such as Oxley’s ‘The Bridge’, due to deliver 24,000 sq.m of retail space by Q4, 2017.
Demand for prominent high-street retail space on Phnom Penh’s key boulevards continues to expand, driven by both international retailers and more established domestic groups. Sihanouk Boulevard, as of Q2, 2015, enjoys minimal vacancy, typically commanding rents of between 20-30 USD per sq.m.
Retail supply in the capital is set to rise significantly by the end of 2017, driven by a combination of new international shopping complexes, such as Parkson’s Phnom Penh City Centre, delivering 57,000 sq.m in Q2, 2016 and Lion City, the second project by the Malaysian developer, set to deliver a further 61,000 sq.m of retail space over the course of 2017, in addition to Hongkong Land’s Exchange Square, supplying 13,000 sq.m of retail space in Q1, 2017.
Vacancy rates within Phnom Penh’s centrally located, purpose built retail centres remains comparatively low, at 22% as of Q2, 2015, with Aeon’s high-occupancy level reducing the overall vacancy rate amongst shopping mall’s from approximately 25% prior to its launch in Q2, 2014. Whilst a number of retail complexes, delivered in secondary locations, continue to struggle to attract retailers, centrally located retail centers are benefiting from high levels of occupier demand.
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PHNOM PENH CONDOMINIUM SECTOR SEES RISE IN RESALE VALUES
The condominium market in Phnom Penh continues to expand, with early investors in centrally located developments enjoying capital gains of up to 30% from early off-plan purchases.
Development activity of high-end condominiums looks set to continue in prime residential locations, with developers also looking to offer luxury projects outside of core residential districts.
CBRE has continued to witness strong interest from the wider Asia Pacific region, with increasing investment from Singaporean, Japanese, Hong Kong and Chinese residents. Although the comparatively high yield guaranteed by a number of leading developers is appealing to oversees purchasers, the main driver remains anticipated capital growth.
Currently, there are 35 Condominium projects in Phnom Penh, including both finished projects and developments currently under construction.
Q1, 2015 will see the sales launch and groundbreaking of Sovann Condominium, a 104 unit luxury development on Mao Tse Tong Boulevard, BKK1. Sky Villa Tower, comprising 254 units across two towers, is due to start construction by Olympic Stadium on Sihanouk Boulevard, with completion set for 2017.
Phnom Penh is experiencing a significant increase in supply, with De Castle Royal delivering 414 condominium units in Q3, 2014 and with Galaxy Residence having delivered a further 44 units in Q4, 2014.
Overall supply in Phnom Penh is due to increase by 533.75% by the end of 2018, driven by large-scale new projects such as D.I. Riviera and Olympia City, both currently under development by OCIC.
Sales of condominiums in Phnom Penh have traditionally been heavily marred by publicised failures of developments that have been sold off-plan and then subsequently ceased construction. Due to the successful completion of key new projects, such as De Castle Royal, this trend has clearly come to an end as confidence grows amongst domestic and international purchasers.
Early purchasers of off-plan condominiums, in successful schemes, have achieved healthy capital appreciation over the past year, with those who purchased in 2008 being in a position to resell for a premium of up to 30% over the course of 2014.
Achieved prices for high-quality condominium units range from $1,500 – $3,000 USD per sq.m in central areas of Phnom Penh. The Bridge, which is due to deliver a 762 condominium units, accounts for the upper figure.
Demand for condominiums is anticipated to increase and be met by supply over the course of 2015 through to 2016. The introduction of high quality projects in central locations will offer prospective investors an opportunity to acquire products that focus on the needs of a heavily expatriate driven area of the Phnom Penh residential market, as foreign nationals continue to require exclusive and up market accommodation in prime locations. Demand is also increasing from an ever more affluent domestic population, which is due to account for a notable proportion of purchasers over the coming years. Domestic demand is a key element of a successful condominium project, due to foreign ownership of an individual building being restricted by law at 70%.
Q1 2015 will see the launch of Sovann Condominium, a 104 unit luxury development located on Mao Tse Tong Blvd, BKK1, in addition to that of Sky Villa Tower, set to launch a further 254 units by Olympic Stadium.
The Q4, 2014 launch of Bhumi Emerald Condominium is set to deliver 47 luxury units located in the Toul Tompong area. The development will be set over 24 floors and is due to come on-stream in 2017.
Q3, 2014 saw the successful completion of De Castle Royal, which has set a new benchmark for quality in the market, further adding strength to the ever-growing sector. Comprising a total of 414 units, the project has been key in rebuilding confidence in the off-plan sales market.
CBRE note that a number of individuals, in addition to established developers, are making considerations towards the construction of further condominium developments. Whilst the majority remain focused on prime, central residential locations, it is likely that development activity will increase in secondary locations over the course of 2015.
STRONG OFF-PLAN SALES CONTINUE TO DRIVE RESIDENTIAL DEVELOPMENT ACTIVITY ON OUTSKIRTS OF PHNOM PENH
The villa and shop house market has continued to expand over the course of 2014, with healthy off-plan sales levels prompting further development activity.
New high quality supply continues to enter the market, with development activity focusing around secondary locations on the outskirts of Phnom Penh.
The supply of new ‘borey’ developments has continued to increase over the course of 2014, with predominantly local developers launching sales of projects located in the north of Phnom Penh.
The standalone villa market remains active, both in terms of sales and residential leasing. Villas with land plots in excess of 500 sq.m remain a sought-after asset, with investors looking to acquire sites for mid to high-rise developments, due to the shortage of reasonably priced, centrally located vacant land plots.
The resale market for existing individual villas remains buoyant, with a steady flow of villas offered for sale in central areas of Phnom Penh.
2014 has seen iconic colonial villas offered for sale, such as The Mansion, an early 20th century residence located behind the FCC overlooking the Royal Museum, currently on the market and ‘No Problem Villa’, located on Street 178, which successfully transacted in Q2, 2014.
Demand for villas and shop houses within ‘borey’ developments remains strong, driven principally by Cambodian nationals able to take advantage of staggered payment options and in-house finance schemes.
Shop houses, comprising upper floor residential accommodation and ground floor retail space continue to be a popular option for Cambodian nationals, due to their relative affordability and the option of using the unit for business purposes in addition to residential accommodation.
Sales and Rents
Off-plan sales rates remain encouraging, with prices ranging from in the region of US$400 to US$1,800 per sq.m, based on Gross Internal Area (GIA) for residential villas and shop houses within ‘borey’ developments.. Achieved rental rates for villas in prime residential areas, such as BKK1, have risen over the past 12, with rent payable ranging from US$3,000 to US$4,500 Per Calendar Month (PCM) for standard sized villas.
Overall the demand for villa and shop houses in Phnom Penh remains high, stemming principally from increasing urbanization and rising standards of living. The successful sales rates of recently completed schemes, in addition to projects currently under construction, gives testament to the strength in demand for quality villa and shop house residences.
The vast majority of current development activity takes place in secondary locations outside of central Phnom Penh. This is principally due to the scarcity of centrally available land and the high cost per square metre in primary locations. Whilst the healthy rates of sales are positive endorsement of the market, increased development and activity on the outskirts of the city will continue to place greater strain on Phnom Penh’s underdeveloped road and wider transport infrastructure.
Whilst off-plan sales are the principal means of disposal, both resale and rental markets, particularly within prime residential areas, remain strong. Over the past 12 months BKK1 has seen the most significant increase in both achieved rental rates and capital values, driven by demand for villa accommodation for both commercial and residential uses and the acquisition of villas for the purpose of redevelopment.
Given the location and quality of current pipeline developments, it is likely that strong off-plan sales rates and absorption of developed stock will continue over the course of 2015, with the fundamental drivers of demand, in the form of urbanization and rising standards of living, likely to continue to support both sales rates and the development of new projects in the short to mid-term. Whilst with the volume of future planned projects, due to the increasing popularity of allocating domestic capital into residential development, in addition to the lack of development controls, oversupply remains a risk, it is likely that rising demand will continue support increasing supply through to 2016.
DEVELOPER INTEREST IN CAMBODIAN COASTLINE AS ANNUAL TOURISM GROWTH SET TO CONTINUE
Tourist arrivals have grown strongly in Cambodia with an average annual increase of 19% over the past decade.
According to the Ministry of Tourism, arrivals between January and August 2014 have risen by 4.2%, when compared with the same period in 2013. The drop in growth rate can be principally attributed to a fall in arrivals by land from neighboring countries, Vietnam and Thailand.
The main port of entry for air traffic is Siem Reap International Airport, which has seen an increase of 16.2%, as of August this year, compared to same point in 2013. The significant increase in arrivals by air, attributed principally to tourists visiting sites of cultural interest, bodes well for coastal resort locations, such as Sihanoukville, which could be well placed to capitalize on tourists seeking to visit a coastal destination following visiting Siem Reap.
Siem Reap is currently the most popular tourist destination In Cambodia, with the attraction of Angkor Wat supported by a significant variety and quality of available hotel accommodation.
COAST & ISLAND RESORTS
Alila Villas Koh Russey, a luxury island development, comprising a total of 227 units, located off the coast of Sihanoukville, broke ground in Q3, 2014. The project is set to deliver a new standard of resort property to the emerging Cambodian market. The project is well placed to further expand on the success of Song Saa Private Island, a scheme of 27 villas that completed in 2013.
The scheme launched off-plan sales of the new duplex apartments, which consist of 47 two-bedroom units, in September of this year.
Ta Tai Resort completed the first phase of development earlier this year, comprising a hotel, apartments and villas on the banks of the Ta Tai River in Koh Kong.
Several prominent developers have plans for large resort schemes, both on the coastline and islands, presenting a range of opportunities for investors seeking to enter the market. With some smaller boutique resorts, such as Akaryn Retreat, delivering 35 pool villas on Koh Krabeay, due to come on-stream over the next 12 months.
FOREIGN OWNERSHIP AND INVESTMENT IN THE RESORT MARKET
Under the 2010 Law on Foreign Ownership foreigners can own units in condominiums or co-owned buildings, excluding ground or underground floors, and providing total foreign ownership does not exceed 70%.
Islands in Cambodia are not available on a freehold basis and developers have acquired them on a concession from the Cambodian Government, allowing them to develop the island and hold title by way of a long-lease.
The majority of coastal and island resort properties are offered on a leasehold basis, as sub-lease of the principal lease. This allows foreign individuals and companies to invest in resort property offerings without the need to establish a land holding company, requiring 51% domestic ownership, as would be necessary to purchase freehold property.
There are a number of attractive investment incentives seen on the market, including guaranteed yields for a fixed period, generous periods of annual use for the investor and special discount rates on resort facilities and services.
There has been a wide investor interest in Cambodia, with enquiries coming from principally Asian countries, as well as Europe and Australia. Regionally Cambodia is an attractive destination for residents of countries where gambling is prohibited, such as China, Vietnam and Thailand. A number of large scale resort developers have gaming as part of their development strategy and see it as a key future component to attract Asian tourists.