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Residential Villa and Shop House Market – CBRE Cambodia MarketView in October 2013

October 2013PHNOM PENH VILLA AND SHOP HOUSE MARKET CONTINUES TO EXPAND FOR LOCAL AND FOREIGN NATIONALS

Introduction

The villa and shop house market has continued to grow in 2013 with current demand exceeding supply. Phnom Penh is experiencing strong commercial and economic growth  which has driven foreign and local nationals to seek such properties.

New high quality supply has entered the market within larger currently operational developments. These developments have  achieved high occupancy levels in a short time frame through off-plan sales and through the increasing demand for high quality residential accommodation within Phnom Penh.

Supply

The supply of villas in Phnom Penh is currently stable but marginally below occupier and target audience demands. Large scale villa developments are mainly located on the outskirts of the city due to the premium price of land in the center of Phnom Penh and whilst many landlords have yet to dispose of their assets, developers continue to seek land to accommodate the future demand of villas. There is currently an over supply of villas in Toul Kork, with many residents seeking to occupy residencies in more desirable locations with improved infrastructure. The market can expect new supply in 2014 such as Borey Lasen, part of the Canadia project located in central Phnom Penh.

As villas have a limited market among Cambodia demographics, new developments have focused on lower end residential properties. The supply of shop houses remains high, and is expected to grow from new projects, such as, New World and Peng Hurth. The forecasted opening of Olympia in 2014 is the main driver of new supply due to it’s central location.

Occupancy

Across the market villa occupancy rates are high. As new supply enters the market, high occupancy will further follow.

The increasing positioning of foreign employment, FDI, and purpose built office space will keep

occupancy levels at a premium. BKK1 has seen a significant increase in food and beverage outlets occupying existing villas which evidences changes of use of villa accommodation.

The Shop Housing market in Phnom Penh is extremely popular among local businesses and families. Therefore occupancy rates of these premises are  meeting the local populations demands and the delivery of expanding supply in this sector will retain such towering occupancy.

Demand

Demand for villas in most developments has remained strong, especially due to the increasing inflow of foreign residents, local and multi national companies, NGO’s, and restaurants. The introduction of new developments launched in 2012 and 2013 saw many units sell out and the increasing demand of these will remain strong and absorb the new supply, allowing rents to remain stable.

Shop Houses are continuing to grow in popularity among Cambodian nationals and demand for these units has remained by far the largest sector of the market in terms of units sold.

Sales and Rents

Sales activity is currently booming within the villa community especially with Basac Gardens and Borey Sunway with both having sold 95% of units at the achieved asking price. Monthly rental figures in the popular expat area of BBK1 range from $3,500 – $6,000 and in Toul Kork from $800-$3,000.

Shop Houses have followed a similar high performing trend with Borey La Sen having sold out by 100% and Olympia City selling 90% of available units. Borey Peng Huoth and New World are performing well but due to their peripheral location are attracting primarily residential uses rather than local businesses.

Overview

Overall the demand for villa and shop houses in Phnom Penh remains high with growth factors including increased foreign investment and economic advances driving market growth into 2014. The market in Phnom Penh is currently exceeding the current level of supply with high occupancy rates from domestic and foreign nationals. The introduction of further high quality products in 2014 including the centrally located Olympia development and the high class Borey Sunway have displayed rapid off-plan sales which demonstrates the necessity of  future supply to contain the expanding demand growth.

While a large amount of villas are being sold off to developers who enjoy the lucrative investment of the rapidly advancing serviced apartment market, landlords that have retained their villa have turned towards commercial tenants. A number of central villas available in the market for lease are currently occupied by large multi-national corporations. The change in land use shows positive signs for the growth of Phnom Penh with commercial properties and apartment developments on the increase.

The demand for shop houses is showing no signs of slowing down with the introduction of new stock from New World, Borey Penh Houth, and Canadia which is evidence that the local population is benefiting from the expanding economy through commercial and residential uses. For the emerging Cambodian middle class, shop houses represent the opportunity to purchase land. The ground floor can be used income producing and the upper floors have the option to add further accommodation to adapt to a growing family.

Therefore the immediate future of the villa and shop house market is attractive as shown by the increasing stock, occupancy rates, and increasing level of demand. Although not everyone in Phnom Penh can will be able to own freehold land in the city, condominiums may become a rapidly growing market when the space for shop houses becomes limited.

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