Land once slated for the country’s tallest building, will now see its ambitions lowered to plans for dozens of luxury villas and several commercial buildings.
South Korea’s GS Engineering & Construction’s original objective for its development on Phnom Penh’s Sothearos Boulevard to be called the International Finance Complex, once included a mixed-use 52-story building and six other buildings on seven hectares of prime real estate.
Now, the land’s development plans have been reborn in the form of the gated community dubbed Kings’ Estates. Thirty-two plots of land will go on the market this month for a project billed as “Millionaire Luxury Living.”
The now-failed IFC, which broke ground in June 2008, became one of the largest and earliest victims of the financial crisis. It also exposed the vulnerabilities of real estate boom and bust, which saw prices over the past several years grow 1,000 percent before falling by more than half in late 2008.
Sung Bonna, CEO for Bonna Realty, which will sell the plots, attributed the change in plans to the lack of demand for high-rises and the lack of gated residential communities in the city center.
“The market for this moment for the high rise is not so much. The low rise have much more demand and also Phnom Penh doesn’t have a good community that is only for the high-end people. Most of the communities are mixed,” he said.
Plots of land for the three-hectare phase one of Kings’ Estate will cost an average of $1 million to $2 million, with home prices depending on the wishes of the buyers.
Construction of the community’s infrastructure will begin next month, though the date of home construction will depend on sales of houses, he said. Phase two, to be built on four hectares, will include restaurants, hotels and residential areas but he declined to give more details, referring questions to the developer Isis Investment.
Hieng Lim, business development manager for Isis, declined to comment and said officials at GS, which still owns the land, were out of the country.
IFC is not the last South Korean project to fall on hard times.
In the last few months, work has stopped at two South Korean major projects offering condominiums–Posco E&C’s $300 million Star River project, located next to GS’s land, and Gold Tower 42. It’s unclear when they could resume.
Tan Hong Kiat, country head for the property consultancy firm Knight Frank, said the market may not be ready for luxury projects and that projects targeting middle class markets will have more success.
“I don’t think at the moment it’s a good time to go into the luxury market, simply because there is not enough demand,” he said.
He described the fate of IFC site as a resembling a global phenomenon of reducing the size of a project to match the economic environment. Still, he said, the change in plans revealed the progress of the Cambodian market.
“To a certain extent it does show that it is not mature enough for this product,” he said referring to the IFC. “It only makes sense that you change the project to meet the demand or you just sell off everything.”
Sear Chai Lin, director of Visal Realty, called the IFC plans too ambitious for the market.
“In Phnom Penh, they are building such big investments and especially the skyscraper, there are not many people who need that kind of modern life,” he said.
He questioned whether Phnom Penh was ready for the investment that Kings’ Estates will require.
“I don’t think there are many buyers who want to buy from them, maybe in the next one year, two years, or three years,” he said.