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Investing in commercial real estate in Cambodia brings many challenges to foreign companies. While you can buy residential real estate on a freehold basis, commercial real estate is significantly more regulated.
That said, there are plenty of reasons why foreign investors have started eyeing the Cambodian market. It’s known for having a business-friendly environment with few capital controls.
US dollars are widely used, also for property transactions, which is just the icing on the cake.
Multinationals have just started entering the market. Urbanization, population growth, and increased prosperity have helped Cambodia to reach some of the highest growth rates in Asia, something that will continue in the future.
Today, we review how you can invest in office space and buildings in Cambodia.
Topics covered:
- Can foreigners buy office space in Cambodia?
- Buying Office Space Through a Company
- Cambodia’s Office Market
- Office Space Gradings
- Commercial Real Estate Agents in Cambodia
Can foreigners buy office space in Cambodia?
As explained in my article about how to buy industrial real estate in Cambodia, strata-titled units are only available to foreigners under current laws.
A benefit of investing in Cambodia is that you can own strata offices outright on a freehold basis as an individual.
In short, strata-titled projects are typically condominiums and where owners share facilities, paying monthly management fees. This excludes the land under the buildings as foreign individuals are not entitled to land ownership.
In recent years we have started to see a rise in completions of strata-titled office space.
As late as 2018, the first strata-titled units were on the market in TK Royal One, a mixed-use development in Phnom Penh’s Tuol Kork district. 4 of the 21 floors were built as strata offices while the remaining are residential units.
The Peak is another renowned project that has gained much interest among many Singaporean investors, for example. Here, owners enjoy net rental incomes 55% over 10 years, guaranteed.
Many of the projects offer turnkey solutions with no outgoing costs such as property taxes, rental income tax, or maintenance fees.
Buying Office Space Through a Company
To purchase regular office space and buildings as a foreigner, it’s common to incorporate a company and own the property with local Cambodian shareholders, might they be individuals or a company.
The process can be lengthy and requires thorough research as you typically manage the ownership through complex contractual setups, adding layers of security to maintain control.
While some types of industries allow 100% foreign ownership of Cambodian companies, different regulations apply in real estate.
I won’t go into greater detail about the incorporation process in this article, but you can write a comment below or contact us by email to understand more.
A basic requirement to minimize risks is to work with a reputable local partner that guides you through the buying process, having sufficient experience of helping foreigners.
Cambodia’s Office Market
Cambodia’s condominium market has been volatile in previous years and prices dropped by up to 50% during the first half of 2020.
The commercial real estate market, on the other hand, is generally less bubbly with smoother variations. Recently, the office market has seen a downward trend which is primarily the result of:
- The COVID-19 pandemic that reduced the demand for office space
- A big increase in the supply of office, after years of increasing occupancy rates and rents
The biggest commercial real estate company in the world, CBRE, has been based in Cambodia since 1993 and has shared valuable insights.
Despite the pandemic, we saw a 34% increase in new office space, equalling 125,500 square meters.
On contrary to places like Thailand, we will see much strata office space being introduced to the market in the coming years. 6 new projects will comprise 180,000 square meters of new strata office space, an increase of 166%.
Recovery in the Commercial Property Market
CBRE predicts that the office market will rebound remarkably and where the following sectors will see the biggest gains, in chronological order:
- Residential market
- Office market
- Industrial real estate and retail market
- Hospitality market
While the residential market has predominantly seen activity from local buyers, increasingly more foreign investors will enter the market. The office market, on the other hand, grows thanks to increased economic activity.
The hospitality market will see the slowest growth according to expectations due to the crisis.
Districts to Buy Office Space in Phnom Penh
The market insights above give you hints about how healthy the office sector is and what to be expected in the future. This article wouldn’t be complete without reviewing the most interesting areas to invest in office space.
As Phnom Penh is the only interesting option when investing in office space as a foreigner, we will only cover the capital and the most interesting areas.
Daun Penh
Daun Penh is the central business district and the home of the famous landmark Phsar Thmei (Central Market), with its iconic art-deco style.
Around 32% of all office space can be found in Daun Penh and it’s predicted to grow significantly in the coming decades.
In comparison to other districts, Daun Penh has fewer residential buildings compared to commercial establishments. But you can also find many restaurants along the river and the nightlife on Street 51 attracts many visitors.
Many embassies are located here, including the Embassy of the United Kingdom, the United States of America Embassy, Ambassador de France, and even the North Korea Embassy.
In addition to a plethora of government buildings, examples of international schools and universities located in Daun Penh include the National Institute of Education, Australian Centre for Education, French Institute of Cambodia, and Beijing International Academy.
Not surprisingly, Daun Penh has some of the most expensive real estate prices and rents, but still significantly cheaper than Singapore and Hong Kong.
If you look to invest in the most sought-after area in Phnom Peng where we will see exponential growth, Daun Penh should be at the top of your list.
Chamkar Mon
Chamkar Mon is a small and the southernmost district in central Phnom Penh, located a stone’s throw from Daun Penh.
BKK1 and BKK2 are two smaller areas inside Chamkar Mon and BKK1 the most attractive to foreign residents. In recent years, we’ve seen rapid development of BKK2 and BKK3, areas that had few modern facilities and establishments previously.
Areas of interest in Chamkar Mon include Naga World, the Russian Market, and the Tuol Tompoung Market. By comparison, the district has more villas and residential projects.
7 Makara
7 Makara belongs to Prampir Meakkakra District, the smallest district in Phnom Penh. With that said, it has absorbed around 17% of all office space in Phnom Penh, coming in third place.
7 Makara is more local compared to the above-mentioned districts but predicted to see much growth in the coming years. It’s more untouched and long-term investors can reap gains here.
A few embassies, like the German Embassy, are located here and you can also find coffee shops and cafes.
Office Space Gradings
Thanks to the rapid growth, you can now find both Grade A, B, and C offices in Cambodia. Let’s review them one by one and what sets them apart.
Grade A: These are the most premium offices and can mainly be found in areas like Daun Penh. Modern HVAC systems, high-quality equipment, and facilities are all needed to be classified as a Grade A office.
Not only do builders pay attention to the interior design, but also the exterior, taking green areas and common spaces into consideration. Many large-sized companies tend to choose Grade A offices to impress on customers.
Grade B: These offices are medium-range offices and the most popular option among corporations, thanks to the lower prices. By comparison, the equipment and facilities are normally slightly lower than Grade A offices.
Grade C: This is the lowest grade and the quality notably lower than Grade A offices. These are typically not found in the central business district. That said, Grade C offices can be suitable options for companies that bootstrap and want to operate with a lower budget.
Commercial Real Estate Agents in Cambodia
It’s still difficult to navigate the Cambodian real estate market, especially the commercial. Luckily, Cambodia is the home of a few commercial real estate agents, both local and international.
Working with at least a foreign-owned agency should be a top priority to assure that the partner understands foreign property ownership regulations in and out.
The chances are that these individuals have been in a similar situation like yourself before and they can relate to your particular situation.
Real estate agents typically charge a 3% commission for residential real estate, but the rate goes down for larger transactions in the commercial market.
Well-known real estate agencies include:
- IPS
- CBRE Cambodia
- Century 21 Cambodia
- Knight Frank
Asia Property HQ can also help you find commercial real estate and office space in developing Asian markets. We work with some of the most credible partners that have years of experience navigating local markets.
