Real Estate in Cambodia

Cambodia has a number of real estate investment opportunities – residential, commercial, industrial and mixed-use real estate investment. Much like any other frontier market, however, there are risks of a political, economic, climate and financial nature.

Given how Cambodian property has yet to adapt to international standards and the historic low income levels of the middle class, there’s a lot of work that needs to be done. At the same time, there’s ample room for growth from a low base.

Finding the diamonds in the rough, however, will be difficult. Partnering with a new developer with a pedigree for high-quality projects and a strong marketing and communications engine will be important.

In Cambodia, there are several different types of property developers – there are local groups like Borey Peng Huoth Group while there are even Japanese developers like Creed Asia. Some carry out public-private infrastructure projects like Triple Gem, which is notable for renovating the University of Phnom Penh, while there are also Cambodian-Chinese developers like Prince Holding Group, a conglomerate that has re-defined the cityscape through Prince Real Estate and Canopy Sands Development in Phnom Penh and Sihanoukville respectively.

For any real estate investor, the key metric that matters is affordability. While Cambodian real estate is considerably cheaper than what can be found nearby in Thailand, it still represents a risk.

However, major differences between Phnom Penh and other metropolises in the region is quickly dissipating – prices have been on the rise for a while (although they did take a hit due to the economic fallout caused by the 2020 COVID-19 pandemic). The country offers political stability in a region that otherwise experienced a lot of tumult in the previous decade. Meanwhile, the peg between the Cambodian riel and the US dollar means there’s little currency risk involved for investors that transact using the leading international currencies (US dollar, yen, renminbi and the euro). Likely as a result, residential and commercial land value has tripled from 2000 to 2019, according to Intellectual Property Services, a Cambodia-based real estate agency.

On average, the price per square meter, a popular measure, hovers around $2,500 for three-bedroom apartments in Phnom Penh. While that’s cheaper than comparable venues like Jakarta or Kuala Lumpur, it’s worth remembering that foreigners can also get a freehold i.e. own the property outright (however, foreigners cannot own land) for all types of properties (in other countries, it’s prominently the luxury condominium segment that’s mostly accessible to foreigners).

Therefore, Cambodia is fast becoming a haven for expats and foreign work professionals who want to be based in an emerging market in Southeast Asia.

Commercial and industrial property is following a similar trajectory with a rapidly transforming Sihanoukville, which is transforming from a budget-friendly beach town to a high-end gaming and entertainment locale, being an attractive destination. Sihanoukville is also close to a rapidly growing industrial suburb. (The Sihanoukville Special Economic Zone, jointly constructed by Chinese and Cambodian enterprises in 2008, is seeing a boom in activity – a total of 100,000 local workers are expected to be hired by companies operating in the area in the coming years.) On the other hand, rapid development in Phnom Penh is attracting a growing number of rural residents keen to access better infrastructure and service opportunities.

The number of malls has increased substantially as international brands like 7-11, Chili’s, H&M, Papa John’s International, Maserati, Pizza Hut and many others make an appearance in the country.

For corporate buyers of real estate, Cambodia also represents a great base for Southeast Asia operations, especially as multinational firms look to relocate some of their Chinese operations out of the country but do not wish to be situated too far away.

Meanwhile, a growing Chinese diaspora is also powering real estate demand underpinning the healthy growth of Cambodian real estate of late.

However, Cambodia is quite vulnerable to climate change. In East and Southeast Asia, four out of every five people are set to be impacted by rising sea levels in the region. As Cambodia depends largely on climate-sensitive sectors including agriculture, land, water resources, forestry and fisheries, investments could lose value considerably. Not only will inclement weather damage livelihoods, there’s also a threat of rising emissions leading to inhabitable living conditions. Further, the damage to property due to storms and floods will derail lives and disrupt economic activity.

Southeast Asia will suffer climate change-related degradation of approximately $2.1 trillion, according to Deloitte. As such, real estate investors will need to be careful about their investment plans. At the same time, their investment decisions can play an important role and send the right signals guiding the direction of development in developing countries.

And there are suitable investment targets as well.

Most developers have not sufficiently considered the impact of climate change but it is quickly changing.

For example, Ream City, a 834 hectare project developed on reclaimed land in Sihanoukville, is the flagship project of Canopy Sands Development, a developer of sustainable and enduring real estate projects in Cambodia.

Upon completion in 2045, it will house 130,000 residents. Apart from condominiums, landed and beachfront homes, it will also feature shopping malls, business hubs, beach resorts, hotels, condotels, yacht and a marina club within the coastal development project.

It’s also a ten-minute drive from the airport.

Earlier in the year, Canopy Sands Development declared it would follow a master plan outlined by Surbana Jurong, a global urban, infrastructure and managed services consulting firm, that is also known for building homes, designing cities, and improving infrastructure for sustainable industrial development and urban living.

The 24-year project will proceed with a vision that enshrines sustainability with areas set up to capture rainwater, promotion of ecological restoration and urban infill projects and a transit-oriented development that prioritizes non-motored transport, appropriately designed tracks or footpaths and environment-friendly vehicles.

It is usually not common for real estate development companies to point out material ESG risks and the steps they are taking to deal with them, especially for those developing projects in their infancy.

Ream City is expected to attract $16 billion in total investment over the years. That still amounts to just a fraction of the total capital – $210 billion – needed every year to ensure future projects help build climate-compatible infrastructure, renewable energy, energy efficiency, food security, agriculture and land use to ensure a green recovery from the pandemic, according to the Development Bank of Singapore and the UN Environment Inquiry.

If successful, it will also stand out as an example in the country and inspire other development projects that contribute to de-carbonizing and green building efforts in Cambodia.

By ensuring that homes and commercial spaces adapt to the changing environmental conditions caused by climate change, the world’s vulnerable families will be thankful as a result.

Real estate investment can therefore be a profitable, supportive and meaningful way to ensure Cambodia follows a sustainable development path.