Phnom Penh developers eye secondary location potential
While central areas of Phnom Penh – most notably the Chamkarmon district, home to the luxury condominiums and apartments of the posh and growingly congested BKK1 – have over the years shown exceptional growth, a lack of buildable land and high prices could see developers moving to secondary locations over the next couple of years.
According to CBRE’s latest unreleased fourth quarter property report, 2015 saw overall condominium supply increasing by 20.2 per cent, with a year-end total of 7,014 units launched off-plan across 26 buildings.
Of this number, Chamkarmon accounted for a substantial 37 per cent of the share with 2,597. Meanwhile, land prices of central districts Chamkarmon, Daun Penh, 7 Makara and Touk Kork increased on an average of 8.4 per cent.
While the report noted that 2015 sales figures across the capital showed marketable appreciation of 11.1 per cent across all grades, mid-range condominiums (priced between $2,250 and $2,650 per square metre) fared best. Conversely, the average price of high-end condominiums rose by only 2.5 per cent, while what is deemed as affordable saw a depreciation of 1.4 per cent last year.
However, secondary areas that had persistently remained undeveloped due to a lack of infrastructure, like Sen Sok and Chroy Changvar peninsula, are on the rise, commanding 15 per cent of the new units announced.
This is a notable shift from previous trends that perceived centralised locations as the best bet for marketable developments.
According to Chris Hobden, manager of CBRE Cambodia, this number will likely increase in the next two years as saturated central locations make it more difficult for large developments to take hold.
“The move to secondary locations is driven by a combination of central land price appreciation and the limited availability of significant central land plots,” he said, noting that developers of large-scale, mixed-use developments are eyeing secondary locations’ long-term potential. Although the viability of secondary locations remains unclear, it does provide developers with more flexibility in terms of planning for large-scale developments while being unencumbered by the limitations of narrow streets, overcrowding and congested traffic.
Yet, infrastructure is still inherent for the success of developments in secondary locations, Hobden said.
“Ultimately, [the] key to the long-term viability of secondary districts will be a combination of infrastructure improvements and the delivery of high-quality schemes incorporating a broad mix of uses.”
In terms of marketing, he said that secondary developments can be priced more competitively, with a higher prospect of long-term capital appreciation.
“As the city expands outwards, this can be highly appealing to prospective purchasers.”