Phnom Penh MarketView – Q2 2017 – CBRE Cambodia

HIGHLIGHTS

The value of approved investment into the construction sector saw a 64% increase year on year, totaling US$3.66 billion across 737 approved projects nationwide during the second quarter of 2017.

Only one condominium project was launched, the development is located on Chroy Changvar Peninsular and comprises 283 units.

Sale prices and rents for condominiums were broadly stable in Q2, as they were during Q1 2017.

By the close of Q2, overall office occupancy saw a marginal increase of 1.25 percentage points compared to the previous quarter.

Average quoting rents for office space fell by 0.5% qo-q, while quoting rents for prime retail witnessed a marginal increase over the same period.

OVERVIEW

During the course of Q2 2017, nationwide, the value of approved investment into construction projects soared 64% y-o-y, and triple the value recorded in the previous quarter. A total of 737 projects gained approval, with a combined value of US$3.66 billion and comprising a total construction area of 5.2 million square meters.

Of the 737 projects approved, most were residential and commercial projects, whilst 23 were in the industrial sector. No noticeable changes in rents for industrial properties were witnessed despite notable increases in demand from Asian investors.

During the second quarter, 1,911 condominium units were completed in Phnom Penh, pushing total supply to 6,109 units. However, the number of new launches continues along a slow trajectory with only one project being announced in Q2. Condominium prices were broadly stable, though an approximate of 1% decrease was seen within the affordable and midrange segments. In the face of new supply, rents stood up well in the condominium sector, remaining stable across the quarter.

Hongkong Land’s project ‘Exchange Square’ was completed and has delivered a total of 18,000 sqm Grade A office space and 8,000 sqm of retail. In the wake of new office supply, overall occupancy rose by 1.25 percentage points across this quarter. However, average rents for Grade B offices fell by 1.4% q-o-q.

Prime retail rents witnessed a slight increase in this quarter, with prime shopping malls and prime high streets accelerating by 1.6% and 4.5%, respectively.

MARKETVIEW : PHNOM PENH CONDOMINIUM Q2 2017

SUPPLY

Condominium supply is still low at this stage with total supply of having expanded by 1,911 units to reach 6,109 units by the end of the second quarter of 2017, an increase of 46% from the previous quarter and approximately double the supply seen during the corresponding period last year.

Only one condominium project was launched offplan over the course of the second quarter. The project which is located on Chroy Changvar Peninsular has added 283 units to the supply pipeline.

SALES PRICES

Overall, average quoting sale prices were broadly stable during the second quarter compared to Q1 2017. An approximate 1% decrease in prices was witnessed within the affordable and mid-range segments, predominantly due to recently launched projects setting lower prices to target local buyers.

It is worth noting that sales during the last two quarters have been slowing. Whilst there has been little fluctuation in quoting sales prices for condominiums, some developers have started to employ increasingly commercial marketing strategies, including discounts on quoting sales prices of between 2% and 10%.

CONDOMINIUM RENTS

Prime condominium rents were broadly stable in Q2, compared to those in Q1; however, rents are likely to face downward pressure as more stock completes over the course of the next 18 months. Average rents of high-end condominiums in prime locations were recorded at circa US$16 per square meter per month, whilst those in the mid-end segment in prime locations stood at US$13 per square meter. Affordable condominiums achieved rents in the region of US$10 per square meter.

Monthly rents for prime 1 bedroom units achieved between US$800 and US$1,500 per month, whilst prime 2 bedroom condominiums rented at between US$1,400 and US$2,500 per month.

MARKETVIEW : PHNOM PENH OFFICE Q2 2017

SUPPLY

Exchange Square, the second Grade-A office in Phnom Penh, was completed and added 18,000 sqm of office space to total supply figures, representing an increase of 5.8% in total supply for Q2 compared to the previous quarter.

By the end of Q2, the overall occupancy rate recorded a marginal increase of 1.25 percentage points compared to previous quarter, indicating that demand is presently keeping pace with new supply.

RENTS

When the whole market is assessed, average rents witnessed a marginal decrease of 0.5% across the second quarter of 2017, compared to the previous quarter. Average quoting rents for Grade B offices fell by 1.4% q-o-q, primarily the result of some offices buildings reducing their rents to compete for occupancy with newly completed Grade-C buildings.

Grade B offices in prime positions maintained their rents across the quarter, indicating that it is within the non-CBD Grade B sector that competition for tenants is most keen.

Quoting rents for Grade-A space remained stable at approximately US$28 per square meter, exclusive of service charge.

STRATA-TITLE OFFICE

During Q2 2017, average quoting prices for strata-title offices stood at approximately US$3,360 per square meter and ranged between US$2,376 and US$4,730 per square meter.

Average quoting prices for Grade A offices were approximately US$4,150 per square meter, whilst quoting prices for Grade B offices averaged US$2,625 per square meter.

CBRE estimate the Gross Initial Yield for Grade A and Grade B strata-title offices to be 6.3% and 8.2%, respectively.

MARKETVIEW : PHNOM PENH RETAIL Q2 2017

SUPPLY

In addition to office space, Exchange Square delivered circa 8,000 square meters of net space into the capital’s retail supply over the course of Q2. The retail podium is home to a number of retail brands including Lucky Premium Supermarket, Pandora, Hard Rock Café, Legend Cinema and Starbucks.

It is worth noting that both local and regional retail operators are considering the grocery sector in Cambodia and Phnom Penh specifically. AEON opened its first premium stand-alone supermarket under the brand of AEON Maxvalu and has plans to expand to 30 stores across Phnom Penh and surrounding provinces, in addition to delivering its second mall which is slated to open in Q2 2018. Makro is currently on course to open its first outlet in Sen Sok District by the end of 2017.

FUTURE RETAIL SUPPLY

As of Q2 2017, the majority of underconstruction retail projects are located within secondary districts, which is a trend set to diversify Phnom Penh’s retail landscape whilst also supporting the city’s urban expansion and population growth outside central districts.

It is worth noting that Sen Sok accounts for 27% of future retail supply. Further future retail supply located in the districts of Chbar Ampov and Mean Chey is largely in support of large residential-led developments.

RENTS

Prime retail rents saw a slight increase across the second quarter. As of Q2 2017, average rents within prime shopping malls were quoted at US$31.6 per square meter per month, whilst community malls quoted an average of US$26.9 per square meter.

Average quoting rents for prime high-street units increased strongly, up 4.5% q-o-q to US$32.0 per square meter, with top quoting rents in highstreet positions standing at US$52 per square meter per month.

MARKETVIEW : PHNOM PENH INDUSTRIAL Q2 2017

TRADE

Following a decrease in 2016, exports to the US, a major export market for the Kingdom’s goods, saw an increase of 4.5% y-o-y to US$1.36 billion during the first six month of 2017. In contrast, growth in exports to Japan slowed during H1 2017, totaling US$591 million, up by 4.5% y-o-y.

The ADB project that Cambodia’s exports will accelerate by 11%, which is higher than the 9% growth in imports expected for 2017.

SUPPLY AND DEMAND

A total of 44 industrial projects were approved in the first six months of 2017, due to deliver a total of circa 385,000 sqm of industrial space, particularly in the forms of warehouses and factories. Although the figure for Q2 is dramatically less if compared to the same period last year or the previous quarter, CBRE is aware that demand for ready-built industrial premises has increased significantly, particularly in Phnom Penh, compared to the same period last year. Early this year, the ADB projected that growth in the industrial sector will be 10.8% in 2017.

The majority of demand for industrial properties in Phnom Penh is for space between 1,000 and 20,000 sqm with a particular concentration of demand in the range of 1,000 – 2,000 sqm.

INDUSTRIAL RENTS

In the second quarter, no significant increases in rents were identified. The highest rents for ready-built factories were found within SEZs where rents reach US$3.5 per sqm per month, a result of the demand for well established infrastructure available at SEZs. The lowest rents for ready-built factories were found within predominantly industrial locations on the city’s fringe, where quoting rents are U$1.8 per sqm.

Rents for built-to-suit space range between US$1.8 per sqm per month for a warehouse or factory of minimal specification to US$6 per sqm for space of international quality or for specialist uses.

Please click here to download the report.

 

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Phnom Penh MarketView – Q1 2017 – CBRE Cambodia

 

Highlights:

The Asian Development Bank expects Cambodia’s GDP to expand by 7.1% in 2017 and 2018, a slight upwards revision from the 7% predicted last year.

Construction investment in Cambodia saw a 22% drop in Q1 2017, compared to the corresponding period last year. A total of 786 projects with a combined value of 1.28 billion USD were approved.

In Q1 2017, overall occupancy and rents of modern office stock in Phnom Penh were stable compared to the previous quarter, whilst supply increased by 6%.

Quoting prices of condominium units saw a marginal decrease across all grades in Q1 compared to the previous quarter.

Two condominium projects, totaling 1,055 units were launched during Q1, both are in secondary districts.

Please click here to download the report.

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Retail developments boost Toul Kork property prices

Toul Kork property valuations are on the rise. For years the area has been among Phnom Penh’s more popular residential housing areas, largely because of the areas affordable pricing and proximity to downtown. Those same features have made it a hit with developers and investors, too. Aeon Mall 2, the latest shopping mall development to hit Phnom Penh, will be located in the district’s Pong Peay City Project. And home owners in the area are happy.

Mr. Mam Sereypanha, CEO at Easy Property Investment, said that the “the rise of Aeon mall 2 in this area will significantly benefit the real estate sector.”

According to Mr Mam, “it will push up the property prices, help increase the buying and selling operations, and contribute to the construction of infrastructure where almost 100% of the existing projects are done.”

For instance, for Borey New World and Borey Angkor Phnom Penh, located very close to Aeon Mall 2, unit prices have doubled since the announcement of the mall with buyers rushing to reserve residential units in this area, said Mr Mam.

He also added that since the potential of this area has grown, the business for Borey developments had also seen a rise, especially amongst existing projects that have been expanding their units in order to satisfy their client’s demands.

In regards to land price, Mr Mam said that, “in the last three or four years, before the construction of Aeon, land prices remained low. But now, those prices have doubled or even tripled. The land along Ouknha Mong Rithy Main Road (located close to the Aeon Mall), ranged as low as $600 to $800 per square meter. Now, the same sells for $2,000+ per square meter. And along Chea Sophara road, prices have risen from $400 to $800 per square meter up to $1,000 to $2,000. If the land site is located far from the main roads, the price goes below $1,000 per square meter.”

There are several other big projects scheduled for completion in the coming years. The Cambodian government approved $7.2 billion in projects in 2016, and several of those developments are now coming online, including Parkson Mall and Exchange Square. Other retail malls have recently undertaken extensive renovations, boosting the outlet’s stock as well as the surrounding residential housing areas.

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Phnom Penh Marketview Q4_2016

Highlights

– Cambodia’s FDI totaled US$2.15 billion in 2016, representing a 25% increase from 2015. The top three recipient sectors for FDI are banking, manufacturing and real estate.

– Nationwide, investment into approved construction projects reached $8.5 billion across 2,636 projects by the end of 2016, an increase of 143% on 2015, which saw $3.5 billion invested in 2,305 projects

– Grade-B office’s average quoted rents appreciated by 2.2% q-o-q and 11.2% y-o-y. Average quoted rents of Grade-C offices slightly depreciated by 0.4% q-o-q and ended the year down 1.2%.

– 616 condominium units were launched across two off-plan projects during Q4; representing the lowest level of new launches seen during the last two years.

Please click here to download a copy of the Marketview.

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CBRE Cambodia Fearless Forecast 2017

Phnom Penh, 20 January 2017 – Mr Marc Townsend, Managing Director of CBRE Cambodia and Vietnam, delivered a presentation outlining some of the keys trends witnessed in the Cambodian real estate market during 2016. In addition, the presentation also highlights what to expect to happen over the course of the coming year.

Please click here to download a copy of the presentation.

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Phnom Penh Marketview Q3_2016

 Highlights

–  GDP growth is anticipated to reach 7% for the year, and continue to expand by 6.9% across 2017 and 2018, according to the World Bank.

–  By the end of Q3 2016, the value of projects granted construction permits was reported as being 76% higher than the corresponding period last year. A total of 2,009 projects have so far been granted permission, with a collective value of US$7.56 billion.

–  The number of condominium project launches is showing signs of slowing, with 3 projects having launched over Q3, totaling 1,022 units.

–  Prime office rents appreciated over Q3. Grade B rents were up 3.8%, whilst supply also increased by 13,400 sqm, equating to an increase in total supply of 4.7%.

Please click here to download a copy of the Marketview.

 

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Is Cambodia’s Residential Market a Target for Investment?

Phnom Penh, 08 November, 2016 – Mr Marc Townsend, Managing Director of CBRE Cambodia and Vietnam,  presented on the topic: “Is Cambodia’s Residential Market a Target for Investment?”

The presentation provided a summary of information and key trends regarding the Phnom Penh residential market in addition to the Camodia second-home markets.

To download a copy of our presentation, please click here

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Phnom Penh MarketView – Q2 2016 – CBRE Cambodia

Highlights:

cambodia_phnom-penh_marketview_2016_q2_final_page_1–   The World Bank officially elevated Cambodia to the status of a ‘lower-middle income’ economy at the close of Q2.

–   Hongkong Land’s mixed-use development, Exchange Square, held its topping-out ceremony over Q2, with overall completion set for Q4 2016.

–   Prime sales and rental prices broadly appreciated over Q2, with the exception of serviced apartment rents, which remained stagnant over the quarter.

–   Average quoting rents across Grade B buildings grew by 4.5% q-o-q, while average quoting rents across Grade C stock decreased by 3.9% q-o-q.

–   2,796 condominium units, across 8 projects, launched over Q2, with Russey Keo district welcoming its first off-plan sales launch.

Please click here to download the MarketView.

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Cambodia: Asia’s New Tiger Economy?

Phnom Penh, 01 September, 2016 – Mr Marc Townsend, Managing Director of CBRE Cambodia and Vietnam,  presented on the topic: “Cambodia: Asia’s New Tiger Economy?”.

The event provided a review of the Phnom Penh property market, principally covering residential, office and retail sectors. In addition, it provided an update of secondary cities – Siem Reap and Sihanoukville.

Please click here to download the presentation: 20160901 – Cambodia Asia’s New Tiger Economy

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Phnom Penh Marketview Q1_2016 (Chinese Version) – CBRE Cambodia

重点摘要
今年第一季度建设投资资金达16.5亿美元,同比2015年第一季度建设投资资金的4.48亿美元,整年度漲幅速度十分显著,漲幅率高达267%。
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。
平均售价和租赁价格在第一季度有具体提升,但由于日益老化的零售物业在即将面临新增供应的挑战,致使零售物业市场租金除外。
苏利亚购物中心——金边最早期的购物商场之一,宣布对商场进行翻修并将其更名为“苏利亚中心点”(SoryaCenter Point)。
第一季度公布的八个公寓项目,总计4158套公寓单元。

Cambodia_Phnom Penh_Marketview_Q1_2016_Chinese

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Phnom Penh MarketView – Q1 2016 – CBRE Cambodia

Highlights

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.

Cambodia_Phnom Penh_Marketview_2016_Q1

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“DOING BUSINESS IN CAMBODIA” – WHAT YOU NEED TO KNOW

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.

Cambodia – Retail Market View

 

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Phnom Penh MarketView, Q4 2015 – CBRE Cambodia

Central Phnom Penh enjoys broad rise in values

Highlights

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.

For more detail, please click here to download.

CBRE Cambodia MarketView – Phnom Penh Q4 2015

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CBRE Launches Blueprint

At CBRE, we believe real estate sits at the heart of how people work, live and thrive. Blueprint is an online magazine where the intellectual capital and institutional knowledge that lives within CBRE is shared with the global business community through an array of engaging, thought-provoking and illuminating content.

On Blueprint, you’ll find stories informed by urbanists, academics and big thinkers around the world. Our stories are unified by business ideas that transcend commercial real estate and examine the built environment’s potential and power to impact businesses, cities and people—told through the lens of commercial real estate.

Whether you’re an industry professional, an urban enthusiast, a member of the general business community or even just a curious reader, we believe our stories will inspire you to look at the world of real estate from a new perspective.

To find out more about Blueprint, please follow the link below:

Blueprint-INT-EMEA_CBRE-Footer_Banner_624X124(1)

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Phnom Penh Condominium Market , CBRE Cambodia Market View in December 2014

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PHNOM PENH CONDOMINIUM SECTOR SEES RISE IN RESALE VALUES

                                                                                

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Introduction

 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.

Supply

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

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.

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Demand

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%.

Overview

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.

 

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CBRE Cambodia have been registered by SECC as valuers for the Securities Sector

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Residential villa & shop house market, CBRE Cambodia MarketView in November 2014

November 2014

STRONG OFF-PLAN SALES CONTINUE TO DRIVE RESIDENTIAL DEVELOPMENT ACTIVITY ON OUTSKIRTS OF PHNOM PENH

November 2014 - 1Introduction

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.

Supply

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

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.

November 2014 - 2

Overview

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.

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Resort Market Cambodia, CBRE Cambodia MarketView in October 2014

October 2014 - 1

DEVELOPER INTEREST IN CAMBODIAN COASTLINE AS ANNUAL TOURISM GROWTH SET TO CONTINUE

October 2014Tourism OVERVIEW

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

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.

October 2014 - 2

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.

October 2014 - 3

 

 

 

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Retail Market Phnom Penh, CBRE Cambodia MarketView in September 2014

September 2014

ECONOMIC INDICATORS BODE WELL FOR FUTURE RETAIL AS NEW SUPPLY IS MET BY DEMAND

September 2014 - 1Introduction

June of this year saw the opening of Aeon Mall adding 66,000 Sq.m of space and 173 units to Phnom Penh’s retail sector. Foreign brands and franchises dominate in each category and the mall has Cambodia’s largest food court with 1,200 seats. Opening with a reported zero vacancy rate has been a great success story for Aeon when compared to the market average rate of approximately 22%. This can be attributed to factors such as new market entrants, expansion of existing operators and a lack of quality leasehold management at existing centers constraining returns for owners and occupiers.

Parkson is set to open a retail center in Q4 2015 adding retail space of 36,000 Sq.m mall anchored by department store as part of the 70,000 Sq.m Phnom Penh City Centre development also incorporating a supermarket, multiscreen cinema and IT/Electronics mall. This will continue the transition of Phnom Penh’s retail sector from existing traditional markets towards International quality, purpose built retail centers that in turn will draw more International brands to this developing market.

Supply

2014 has seen some of the city’s biggest developments come to fruition with Vattanac Capital and Aeon mall completing in the first half of the year adding a combined 71,000 Sq.m of prime retail space to Phnom Penh’s retail sector. 2015 will see Parkson mall and department store open adding a further 70,000 Sq.m. This will see total retail supply more than double from 105,000 Sq.m in 2012 to more than 300,000 Sq.m by 2016. Q2 2014 also saw the soft launch of Vattanac Capital’s retail offering including international brands such as Hugo Boss, Longchamp, TWG and Rimowa.

Demand

Speaking at the opening launch of Aeon mall, Managing Director, Shinobu Washizawa said the mall target customer group was aged 20 – 30 years old; a sign of Cambodia’s young demographic and fledgling middle class with increasing disposable income. Economic indicators are encouraging with GDP growth at 7.2%; one of the fastest rates in the world. With purpose built, International quality retail space now available many foreign brands, including 43 Japanese retailers have opened outlets in Cambodia for the first time. Aeon has seen a much lower vacancy rate than the market average with demand coming from local and international players.

Rent

Average rent* across the shopping centers stands at $27.30 per Sq.M ranging from $20 to $32 per Sq.M, the arrival of International operators such as Aeon and Parkson has seen the introduction of modern rental practices such as turnover rents.*(Average market rents calculated on Ground floor & 1st floor basis)

Brands

A range of new brands have entered the market for the 1st time including:
F&B: Breadtalk, Kenny Rodgers Roasters, Beard Papa’s, S&P, Pepper Lunch and Lotteria.
Fashion: Giordano, Clarks, H.E. by Mango, Penshoppe, Lowrys Farm, Bonia, Carlo Rino, Flaxus Tokyo and Wacoal.
Other: Toni & Guy, L’Occitane, Rimowa, Daiso Major Cineplex and Future World (Apple).
A number of key car bands are set to establish stand-alone units in Phnom Penh, with BMW arriving last year and Audi and Land Rover set to open units.

over the course of 2014. The Lucky Department Store closed on Monireth, Levi’s relocated to City Mall on the other side of the street, Campore Group opened multibrand Central Mall at Central Market.

Future Supply

Phnom Penh will see major increases in supply of retail space over the next two years with gross floor area for purpose built multi-tenanted retail set to increase by more than150% by the end of 2014 with an additional supply in the pipeline through to 2017 with developments Olympia by OCIC and The Bridge by Oxley under construction with a second Aeon mall now in early stages of discussion. Parkson confirmed 2 additional projects, Lion City and above mentioned The Bridge by Oxley where they will manage the retail component. With established retail developers Aeon, Parkson and Hongkong Land responsible for this new supply the quality of space and management is set to increase prompting an uplift in average rents; competition from these established shopping center operators is likely to weigh further on performance of older centers already witnessing lower occupancy and customer footfall in their centers.

Overview

Cambodia has a young population with over 30% under the age of 15 and a further 21% aged 15-24. GDP per capita growth was last recorded at 6.6% and although largely a rural population there is an urbanization rate of 3.25% per annum. This is a demographic picture that bodes well for future retail demand with a youthful workforce, and growing urban population. Incomes are rising fast; albeit from a low base but discretionary income is becoming achievable for many families for the first time. A recent report calculated the Cambodia GNI at $950 per capita; fast approaching the World Bank definition of a middle income-economy at $1,045.

Retail supply is set to grow in coming years but CBRE feel this will be met by demand due to improved quality of retail space, international management and the sectors growth potential. 2014 has seen a number of International brands enter Cambodia for the first time and this is a trend set to continue as the country enjoys improved political stability and, increased local demand.

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Phnom Penh Office Market, CBRE Cambodia MarketView in August 2014

August 2014

FLAGSHIP DEVELOPMENT VATTANAC CAPITAL SEES FIRST TENANTS ARRIVE

August 2014 - 1Demand across Phnom Penh’s office market is principally being driven by multinationals from the international financial services sectors. Supply in 2014 has increased after seeing limited space come onto the market in 2013, with a notable increase in quality recently delivered by Vattanac Capital. Phnom Penh can now boast office segmentation, with a range of quality-grade options offering available space.

Supply

2014 should see approximately 52,000 sq.m of new office supply delivered, with 17% of total supply now attributed to the recently launched office component of Vattanac Capital.

The highly anticipated development launched 23 storeys of grade A accommodation in Q2 2014, delivering a new level of space to Phnom Penh’s expanding office sector. A number of smaller developments are also due to come on-stream over the course of 2014. A further 15,000 sq.m of grade B/C space is set to arrive by Q1, 2015.

The Bridge, a joint venture between Singapore’s Oxley Holdings and Cambodia’s World Bridge Land, scheduled for completion by 2018, recently launched the off-plan sales of their Small Office Home Office (SoHo) concept, located within the mixed-use development.

Occupancy rates remain broadly positive, with the majority of Grade B/C multi-tenanted office buildings enjoying occupancy rates in excess of 90%. Overall occupancy rates decreased in Q2 as new supply arrived onto the market.

The majority of office space in Phnom Penh is still low grade by international standards, with Grade A and B+ properties equating to 33% of current stock.

Demand

The majority of new demand can be attributed to multinational corporations, in sectors such as banking, finance and securities, moving towards larger floor plates, with requirements typically in excess of 250 sq.m.

Parking provisions remain a key requirement of the majority of tenants, with various measures being taken by office buildings, such as Phnom Penh Tower, to provide further parking facilities, principally as a result of high occupancy levels.

Rents

The prime-rent index across Phnom Penh shows an annual growth rate of 10%, with further prime rental growth expected by the end of 2014.

A lack of new supply in 2013 saw landlords increase rents in accordance with the performance of their buildings. Rents across all grades increased, as lower grade properties capitalised on the lack of available space within Grade-B or above buildings.

Increased occupancy in Grade B+ properties drove rents to in excess of $20/sq.m, with Vattanac Capital achieving rents in excess of $30/sq.m, highlighting the increased requirements of tenants to establish themselves within quality commercial developments.

The growth in achieved rents across the market can be attributed to steady international demand. Across all international office grades, the current market average rent per sq.m stands at $20.

Business Attraction

Cambodia is likely to remain favourable to international business, throughout 2014 and into 2015, as integration with the Association of Southeast Asian Countries (ASEAN) comes into force next year. This is anticipated to further stimulate demand for office accommodation from regional occupiers.

Renewed interest in Phnom Penh has been observed following the recent ending of the political deadlock between the ruling Cambodian People’s Party (CPP) and the Cambodia National Rescue Party (CNRP).

An agreement reached at the end of July led to CNRP legislators resuming their seats in the National Assembly .

Phnom Penh’s Standard Office Leasing Terms

The following terms and conditions usually apply to office leases in Cambodia, but should be used as a guide only. Professional legal and surveying advice should be sought before entering into any binding contract.

Lease Length: Generally, leases for commercial office space in Phnom Penh are for two years or longer. It is possible to have a lease term for less than two years, but landlords usually request a higher rent for the increased flexibility.

Service Charge/Management fee: This usually pays for all costs incurred running the building such as routine maintenance of all major plant & equipment, security, cleaning etc. Most older office buildings in Cambodia do not charge separate management fees, but for newer buildings the management fees are between $2-5 psqm. In more mature markets, audited accounts of the expenditure are provided to the tenant at the end of the year, but this does not happen yet in Cambodia.

Deposit: Dependent upon lease term, but generally 3 months’ gross rental, non-interest bearing, refundable upon expiry of the ease subject to performance of rent and repairing covenants.

Rent-free fitting out period: The amount of office space leased, the cost psqm and length of term determine the amount of rent free period. Presently, it ranges from 1 week to 3 months.

Fitting-out costs: The capital costs of fitting out, including loose furniture but excluding office equipment, the price can range dramatically from $80 to $400 per square meter.

Renewal provisions: There are no statutory rights of renewal in Cambodia and the landlord and tenant negotiate new terms close to lease expiry. However, the lease renewal procedure can be incorporated into the contract including maximum rent increases on renewal to protect the occupier.

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