Land and Investment, CBRE Cambodia MarketView in June 2014

June 2014 1 300x35 Land and Investment, CBRE Cambodia MarketView in June 2014

 

June 2014 86x300 Land and Investment, CBRE Cambodia MarketView in June 2014LAND AND INVESTMENT OVERVIEW

During the Khmer Rouge period from 1975-1979 the land title system was completely abolished and all records of previous land titles were destroyed. The land titles system was not re-introduced until 1992 when the land law was passed, enabling people who have lived on the same piece of land for 5 years to qualify for titles. Currently, land in Cambodia is either owned privately or by the state but not all land is registered as the land system remains underdeveloped. Investors are advised to check whether a proper land title exists.

Land titles are represented in two forms soft and hard title. Soft title refers to a title where a property is registered at the local municipal level but which cannot be used as collateral for bank loans while hard title refers to a title issued at the national government level which can be used a collateral for bank loans. Hard title is the most secure form of ownership. However, the majority of transactions still occur for land with soft title to avoid high transaction costs which include property registration taxes and ownership transfer fees. Private freehold ownership is permissible for all types of land but the full ownership is restricted to Cambodian citizens or companies with the majority of shares being owned by Cambodian citizens.

Foreign investors are not allowed to acquire freehold land unless a land holding company is established with at least a 51% share controlled by a Cambodian citizen or company. Foreign investors can also use land in Cambodia under a long term lease. The maximum lease term is restricted to 50 years determined by the civil code established in December 2011. The lease structure system allows foreign investors to lease property if the property is properly registered with a land title certificate.

TAXES

Property Tax is levied on all property worth over KHR 100 million (US$24,000) in Cambodia. The tax is payable annually by the owner of the property at a rate of 0.1% of the government assessed value.

Unused Land Tax is payable for all unused land. The tax is calculated at a rate of 2% of the market value of the land per square meter as determined by the Unused Land Valuation Commission of the Ministry of Economy and Finance. The unused land tax is paid annually by the landowner.

Property Transfer Tax is levied on a sale of land with Hard Title, at 4% of the assessed property value determined by the tax department, by the purchaser.

INVESTMENT ANNOUNCEMENTS

A number of significant developments / transactions were announced or launched in 2014, as follows:

HLH Group announced that D’Lotus Development Ltd, of which it holds a 49% stake, entered into a Sale and Purchase Agreement with Shukaku Inc. to acquire 13,541 square metres of freehold land in Boueng Kak, Daun Penh, for US$14,895,000 (app. 1,100 USD per sq.m). The land is to be acquired for the purpose of a developing a mixed use scheme comprising office, residential and retail accommodation.

Plans to develop a new ‘Grade A’ office tower were announced by a group of investors, operating provisionally under the name of  ‘Kingdom Luxury Development Co.’ to develop a 25-storey office tower on Norodom Boulevard.

Oxley Holdings, with their partners World Bridge Land, commenced off-plan sales of the both the condominiums and the ‘SoHo’ units for their mixed-use development, The Bridge, located by the Australian Embassy in Tonle Bassac Commune.

City Star announced an extended minimum guaranteed yield of 6%, for a five year period, on all one-bedroom villas on Alila Villas Koh Russey. The decision was made due to strong projected revenue forecasts for the luxury-island resort.

Times Centre is shorty due to commence sales of the condominiums units within the mixed-use development located by Olympic Stadium.

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Hotel and Tourism, Cambodia – CBRE Cambodia MarketView in May 2014

 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

CAMBODIA’S TOURISM SECTOR CONTINUES TO EXPAND WITH INCREASE IN INTERNATIONAL ARRIVALS

May 2014 89x300 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

OVERVIEW

The Cambodian tourism sector continued to enjoy steady growth over the course of 2013, with the number of international arrivals increasing by 17.5%, to a total of 4,210,165, up from 3,584,037 in 2012. The average length of stay also increased to, 6.75 days, up from 6.5.

Average hotel occupancy rates in 2013 rose to 69.53%, up from 68.49% the previous year.

The current REVPAR (Revenue per Available Room) in the four and five star hotel market in Phnom Penh ranges from US$25 up to US$100.

Siem Reap remains the most popular destination for tourists entering Cambodia, with arrivals into Siem Reap International Airport accounting for 28.1% of all arrivals, compared to Phnom Penh at 19.9%.

Tourism to Sihanoukville is expected to increase over the coming years, with frequent flights available from Siem Reap and with the delivery of new luxury hotel accommodation off the Sihanoukville coast.

HOTELS

Future supply is set to increase, with the completion of the Sohka Hotel and Naga 2 in Phnom Penh.

Sohka is set to launch approximately  450 rooms onto the market and Naga 2 is set to deliver in excess of 1000, increasing Phnom Penh luxury hotel supply by 70%.

Alila Villas Koh Russey is set to deliver Cambodia’s first internationally branded Island resort, located off the western Cambodian coast, in close proximity to Sihanoukville. This will build on the success of Song Saa Private Island, launched in 2012.

TOURISM

The planned expansion of both Phnom Penh and Sihanoukville International Airports will support the growing number of international arrivals, with the capacity of at both airports set to approximately double over the coming years. Both airports will be able to accommodate up to 5 million travellers respectively, per annum, up from their current capacities of 2.5 million.

 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

Tourism statistics

Tourism accounted directly for 10.4% of Cambodia’s GDP in 2013, a rise of 6.9% from 2012 and significantly higher than the Asia Pacific average of 2.3%. Tourism in Cambodia currently contributes a greater relative proportion of GDP than any other ASEAN economy. Total foreign arrivals increased by 17.5%  Y-o-Y, with arrivals from Loas and China (PRC) growing significantly, by 63.2% and 38.7%, respectively.

Tourism is anticipated to account for an increasingly large proportion of Cambodia’s overall GDP between 2014-2024.

Compared to the figures from 2012, the share of arrivals via land and air remains consistent, with land arrivals accounting for 50.3%. This can be attributed to visitors entering from neighbouring countries Laos, Vietnam and Thailand.

As in previous years, Siem Reap International Airport has the highest share of arrivals at 28.1%, with 19.9% of arrivals attributed to Phnom Penh.  According to the Cambodian Government, approximately US$80 million will be invested to expand the international terminal in Phnom Penh and US$100 million will be used to upgrade Siem Reap International Airport.

 Hotel and Tourism, Cambodia   CBRE Cambodia MarketView in May 2014

 

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Industrial Market, Cambodia – CBRE Cambodia MarketView in April 2014

 Industrial Market, Cambodia   CBRE Cambodia MarketView in April 2014

 

INDUSTRIAL MARKET REMAINS STABLE, WITH CONTINUED FOREIGN DIRECT INVESTMENT IN MANUFACTURING

 

April 2014 86x300 Industrial Market, Cambodia   CBRE Cambodia MarketView in April 2014Introduction

Cambodia remains an attractive destination for foreign direct investment in manufacturing, with low inflation rates of 2.9% and comparatively low minimum wages. Cambodia’s industrial output grew by 9.5% over the course 2013,  the 17th highest industrial growth rate globally and above wider Cambodian GPD of 7.3%. The impact of recent unrest amongst garment workers, and the subsequent raising of their minimum wage, appears not to have significantly diminished demand for industrial space in the short-term.

Imports

Cambodia’s principal imports remain that of finished goods with the main products being petroleum, cigarettes, gold, construction materials, machinery, motor vehicles and pharmaceutical products. Imports reached $8.895 bn in 2013, up from $7.965 bn in 2012.

Exports

Cambodia’s principal exports are clothing, timber, tobacco, cassava, fish and rice. The country’s exports amounted to $6.781 bn in 2013, up from $6.016 bn in 2012.

Rents

Factory rents in most Asian markets – particularly China – continued to record steady gains in Q1 2014 along with the improvement in regional exports. In Cambodia rents are generally stable as a continuation of trends seen in  2013, with prime locations in industrial zones commanding rents of $2.5 p/sq.m.

Rents in lower quality industrial zones, where units are of a lesser standard, stand at $2 p/sq.m.

Supply

There remains a distinct lack in the  supply of light industrial building  as occupancy levels in existing industrial zones remain high. There remains a limited number of Special Economic Zones (SEZ’s) where developers have built warehouses available for rent, whilst a limited number of developers are willing to ‘build to suite’.

Build to suite units are generally held on long-lease terms of 10-30 years.

Demand

Increasing labour costs in China and Japan continue to drive the demand for industrial property within Cambodia. In addition to this, increased minimum wages for factory workers in Thailand may in the future prompt cross border relocations into established industrial zones in the north of Cambodia at Poipet, and to the west of Cambodia at Koh Kong.

Each of these bordering economic zones are linked directly to the reliable Thai electricity line.

Take-up is steadily increasing across the Special Economic Zones (SEZ’s), which are seeing the number of Japanese and Chinese occupiers increase significantly, with both nations investing heavily into the SEZ’s in particular.

The opportunities to relocate to Cambodia in search of better production prospects are supported by the improving infrastructure, in particular the deep sea port of Sihanoukville and its neighboring economic zone. Sihanoukville also has the perceived advantage of being outside of any future political unrest in the capital.

Future Supply

The supply of industrial units will be a key influential factor in the growth of Cambodia’s economy, ensuring that foreign direct investment (FDI) can continue to drive the markets. A number of industrial zones have been proposed for development within sites acquired for the purpose of satellite cities. These industrial zones will provide industrial units to the North, South, and North West portions of Phnom Penh, and will cover approximately 7,000 hectares of land in total. They will be supported by revolutionized infrastructure enabling further development of import and export opportunities. These developments are still likely to focus more on freehold disposals than matching market demand and supplying rental units. This can largely be put down to the low returns achieved from current rental prices.

Overview

The World Bank forecasts 3.2% worldwide annual growth over the course of 2014, up from 2.4 in 2013, driven by the anticipated economic recovery in the United States, the Eurozone and Japan. This bodes well for the Cambodian industrial market, as they collectively comprise the clear majority of consumers of Cambodian exports. Recent political unrest amongst garment factory workers, and the subsequent raise of their minimum wages, may prove to have an impact the long-term growth of the industrial market.

The demand for industrial rental units in prime locations remains high in 2014, as Chinese and Japanese companies look to relocate due to high production costs in their retrospective countries. Although the increased demand is unlikely to be met by future industrial parks, Special Economic Zones (SEZ’s) are becoming an increasingly popular alternative to the established industrial parks.

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Koh Russey, a jewel by the sea – CBRE Cambodia

After its November launch in Hong Kong, Alila Villas Koh Russey will break ground late next month, initiating the construction of a world-class luxury resort.

Alila Villas occupies 25 hectares on Koh Russey, an island in the Koh Rong archipelago in the Gulf of Thailand, with easy access from Sihanoukville via Ochheuteal jetty.

The first phase of the development will see the completion of the villas and the hotel in late 2015, according to Chris Hobden, surveyor at CBRE Cambodia, which is the authorised sales agent for the luxury island-resort development.

“It will bring a new standard of luxury to the southern coastline of Cambodia. Both Alila and CityStar are very focused on sustainability, which is not always a priority here,” says Hobden, who adds that just last week the project design was endorsed by EarthCheck.

EarthCheck is an Australia-based organisation that provides benchmarks and scientific advice and certification for sustainable tourism.

Among the many sustainable features of the villas are systems that automatically adjust lighting and temperature when occupants enter or leave the villas.

Meanwhile, resort structures only account for 15 per cent of the total site area, preserving most of the natural foliage.

Koh Russey 300x200 Koh Russey, a jewel by the sea   CBRE CambodiaThe resort will also feature a nursery, which aims to protect more than 20 species of trees indigenous to the island, and an exclusion zone 200 metres around the resort that will preserve the marine environment – fishing boats will dock at jetties at the northern side of the island.

CityStar is pre-selling 132 villas – each of which has a swimming pool – and 47 duplex apartments. The villas will range from one-bedroom to four and from $480,000 to $2 million and more, according to Hobden.

“For one-bedroom villas, you have a guaranteed return of 6 per cent for three years – years two, three and four of hotel operations – and after that, the rental income is split 50/50 between Alila and the villa owner, after a 15 per cent maintenance, management and service charge fee is deducted,” Hobden says.

For two-bedroom and four-bedroom villas, owners have the choice of keeping them fully private or asking the hotel to manage them for periods of five years, on a renewable basis. The duplex apartments are all private, although CityStar and Alia are in a position to offer services.

Rates are expected to be set at around $500 a night for a one-bedroom villa, $600 for a two-bedroom villa and $1,360 for a four-bedroom villa.

Hobden says it will be the first coastal resort in Cambodia to be managed by an iconic brand.

The developer is French CityStar, founded in 2003 by Jean-Louis Charon, who was formerly managing director of Nexity, France’s No.1 real estate development company. The managing director in Cambodia is Etienne Chenevier, an established entrepreneur with over 20 years’ experience in Asia.

It is the first time that Alila has cooperated with CityStar, and Hobden describes it as a development that adds another level of prestige to the project.

“We’re talking about two companies that both have strong track records, and you need that if you’re going to attract investors,” he says.

According to Hobden, the best parallels for the resort regionally are in Bali, where Alila Villas Uluwatu and Alila Villas Soori have garnered multiple international awards.

Hobden calls Alila Villas the “crafted luxury” arm of the company’s profile, and the new Cambodian villa resort will be only the fourth of its kind worldwide.

Alila Villas Koh Russey is designed by Singaporean architect Chioh-Hui Goh of renowned architectural firm studiogoto.

David Simister, chairman of CBRE Thailand and Cambodia, says he is enthusiastic about the long-term potential for the Cambodian hospitality sector and particularly beach resorts, having seen dramatic growth in values in Phuket and Bali.

“Cambodia has the appeal, natural hospitality and unspoiled islands to offer a fresh and more Eco-conscious approach to resorts,” Simister says.

Meanwhile, on the subject of Alila Koh Russey, Hobden says there is already some early interest from investors.

“Considering the full marketing campaign has not got under way yet, we have already had considerable interest from investors,” says Hobden, who was not at liberty to disclose precise sales figures.

Just 25 minutes by private car and speedboat from Sihanoukville Airport, Hobden notes that Alila Villas Koh Russey is perfectly positioned to take advantage of Siem Reap’s luxury tourism sector by offering visitors a luxury boutique beach holiday.

“With the daily flights from Siem Reap to Sihanoukville, you could fly into Siem Reap, and then fly almost direct to Alila,” Hobden says.

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