Demand for purpose-built office space has bounced back following a post-election dip as real estate firms predict stable growth in the industry, with almost 95 percent of available office space occupied.
Following July’s disputed national election, demand for new office space slumped along with investor confidence, according to Ross Wheble, country manager at real estate firm Knight Frank (Cambodia) Pte. Ltd. However, since the start of the new year, demand has returned to previous levels.
“The…election and the subsequent protests put a dampener on the market but since the start of the year confidence has returned and we are seeing similar levels of demand for office space recorded during 2012 and [the] first half of 2013,” he said in an email.
Mr. Wheble added that while demand for office space is growing, the growth of industries such as finance, insurance and real estate—all of which remain in their infancy—will further accelerate the need for modern offices.
“Whilst there is clearly demand growth from multinational companies coming into Cambodia, the rate of growth is still relatively moderate,” he said.
There are approximately 183,000 square meters of leasable office space in Phnom Penh—excluding the unfinished Vattanac Capital Tower, the only grade-A listed space—with the occupancy rate at about 91.7 percent in the first quarter of this year, according to Knight Frank research.
The average rent for existing grade-B office buildings ranges from $18 to $22 per square meter per month, while rent at the 29,000 square-meter Vattanac Capital Tower starts from about $25 per square meter.
Charles Vann, executive vice president of Canadia Bank, whose investment arm owns the 32-story Canadia Tower, also said the sector was once again buoyant after a period of inactivity.
“Before the election, there was demand for office space and more activity and after July it slowed. But now it is getting better,” he said.
Mr. Vann said there is an increasing trend of companies looking to operate out of modern, serviced buildings.
“I think at first people were reluctant to move into offices because they were used to operating out of small buildings and villas, but now, especially for corporate companies, they see it is more appropriate to be placed in an office,” he said.
Thavrith Lim, sales and marketing director at CB Richard Ellis in Cambodia, said the price per square meter for office space has gone up by $2 this year compared to this time last year, as demand is beginning to outstrip supply.
“Aside from Phnom Penh Tower and Canadia Tower, there is hardly any grade-B space. And those buildings are at about 95 percent full now,” he said.
Mr. Lim added that his firm’s efforts to fill higher-grade space in Vattanac Capital Tower, which is currently only 20 percent full, remains a challenge.
“People are used to paying for grade-B space, so it will be a challenge to fill up, but we’ll get there,” he said.