Real estate investment climate looks bright post-COVID-19 for Cambodia despite fierce competition in some sectors and an oversupply of office space, according to the managing director of real estate agency CBRE, James Hodge.
Hodge recently hosted a webinar alongside Jay Cohen, director of the Phnom Penh branch of law firm Tilleke & Gibbons, and the two discussed different avenues for investors hoping to make an impact in the Kingdom.
Hodge said that although Cambodia lags behind some of its neighbors in terms of level of development, the strong GDP growth the country experienced before the pandemic should pick up once the dust settles.
He said the tried and true practice of buying land and developing it is still viable for large investors, but market dynamics are changing, which opens up opportunities in other areas.
As Cohen explained in detail, the bottom-up approach is usually conducted by securing land with a Cambodian partner and setting up a land company before setting up another company to develop the land. Indeed, foreigners cannot own land in the Kingdom.
Outside of normal investment channels, opportunities exist in less crowded areas such as condominiums, offices and commercial spaces. Hospitals, schools, and industrial and logistics projects offer less competitive footprint.
“The pandemic has created increased demand, especially for health care and education at the national level,” he said.
He also mentioned retirement housing, data centers and potentially student housing in the future as possible sectors in which to invest.
As a symbol of Cambodia’s ability to develop rapidly, Hodge pointed to Sihanoukville, which has been transformed from a quiet tourist town and fishing village into a gambling hub and modernist city in a short time.
“While this is an extreme example, it is a good indicator of a lot of things we are seeing in Cambodia and especially how Cambodia is preparing for resurgent growth after the pandemic recedes. of Covid-19,” he said.
Sihanoukville’s infrastructure is equipped with smart technology that can monitor traffic and crime data and he said this could be replicated in new developments across Cambodia.
“If the Kingdom can introduce this kind of smart infrastructure first rather than going the usual development path, then potentially the capacity and resilience of that infrastructure can be much better than what we might have seen and that can help Cambodia develop even faster,” he said.
Upgrading infrastructure across the Kingdom is evident, he added, such as upgrading roads and highways linking major points of interest, such as between Phnom Penh, Sihanoukville and Ho Chi Minh City.
He also cited the rapid development of the third ring around Phnom Penh as an example of development priorities taking place outside the city, as urban land prices rise and developers seek more affordable options with a lane. clearer to strong returns.
As the clientele of recent developments shifts from international clients to domestic buyers, affordable housing developments have seen an increase in demand.
Investors have two paths to choose from, he said, investing in affordable developments on the outskirts of the city, or pinning their hopes on increased demand for luxury high-rise units in the city once that the economy will recover from the pandemic.
Hodge also expects there to be a window for opportunistic investors to take over incomplete projects hampered by a lack of funding.
Other factors affecting the real estate environment include de-dollarization – a practice that could benefit investors if the riel can retain strong value – and the lack of institutional investors like Blackrock in the country – an absence that leaves many room for small and medium-sized enterprises. large-scale investors.
The ongoing crisis in Myanmar has also caused developers to look elsewhere after their prospects were wiped out when the country descended into turmoil.
He said risk mitigation is important when considering investing in Cambodia and this can be done by having clear investment and operating models and ensuring a stable source of cash flow.
In the retail sector, Hodge said the market did not need more development, but rather operational changes and diversification to better take advantage of the market.
For those looking for assets to buy, Hodge recommended looking into the hotel and condominium sectors. In the condominium sector, he said buyers can expect discounts of 20-30% with more flexible loan terms.