Real Estate Boom in Cambodia's Capital

A decade ago, Phnom Penh didn't even have a traffic light. Now, high-rise condos and offices are in development and land speculators are raking in profits

by Susan Postlewaite

Construction is now under way on Gold Tower 42, the Korean-funded project that upon its completion will be the first skyscraper in Cambodia.

At a construction site in the middle of the city, a yellow backhoe levels rubble left from the previous building, an old hospital, while dozens of workmen in hard hats and rubber boots scrape away at the dirt. Nothing that noteworthy about this scene—until you consider the location: the intersection of Monivong and Sihanouk Boulevards, in downtown Phnom Penh.

After spending most of the past three decades struggling to recover from the legacy of the Khmer Rouge's genocidal rule, Cambodia is in the midst of a real estate boom. If all goes as planned, the dirt at Monivong and Sihanouk will soon sprout the country's first skyscraper, a 42-story residential building funded by money from South Korea. A few kilometers away, near the river, workers are clearing a lot for another skyscraper, also Korean and even bigger, with 52 stories.

A decade ago, Phnom Penh lacked even a single traffic light. Today, as land speculators rake in profits and new developments lure tenants, the dilapidated capital, which until recently was dotted with dangling electric wires and garbage-strewn lots, is getting a makeover. All over the city, shanty towns and old villas are being sold for land value and razed to make way for high-rise apartments, office buildings, shopping malls, and new villas.

Other parts of the country are seeing development, too. Developers are targeting Siem Reap (BusinessWeek.com, 4/21/08), near the ancient temples of Angkor Wat, for new hotels.

Does Cambodia Need Skyscrapers?

The Phnom Penh skyscrapers, which will be more than three times higher than the tallest existing building in Cambodia, are the most dazzling projects. And the most controversial. The developer of the $240 million Gold Tower 42, Yonwoo Co., expects construction to take three and a half years to complete. Already, says Teng Rithy, sales manager for Gold Tower 42, "high-ranking Cambodians and some foreigners from other Asian countries" are plunking down deposits. "We are 80% sold out," he boasts.

Not everyone is convinced the skyscrapers make sense. Many lawyers, bankers, and real estate brokers in the Cambodian capital are wondering whether the skyscrapers will really go up and whether there is demand for new construction. So far, new buildings are not having trouble leasing, since the city suffers from a shortage of modern office space. Tenants like the World Bank lease space in rabbit-warren-like villas with odd hallways leading in all directions.

But residential skyscrapers are a new concept in a country that not too long ago was still giving away property, not trying to market a 40th-floor condo for $1.6 million. "I feel it's a little bit early for that," says Sung Bonna, head of Bonna Realty, one of the leading real estate firms in Cambodia. "They said it's going to be a success. But I don't know. If it doesn't happen, it is not good for us."

Bonna says the whole idea of a real estate market in Cambodia is so new that no one can predict how it will turn. "We used to share property, not sell it. After the Pol Pot regime, however many properties you want, you can take all of them." He says there is a need for more modern restaurants, office buildings, and commercial centers, but the supply and demand for residential properties is in balance.

Korean Connection

For now, though, there are promising signs. Prime Minister Hun Sen—whose government at one point or another signs off on the big development deals—likes the skyscrapers and he wants more of them, according to his aide, Sry Thamarong. And land prices are hot. A traditional shop house—4 meters wide by 18 meters deep and going up four to five floors—along the river that sold in 2006 for $300,000 is now going for $600,000 to $700,000. But this is still much cheaper than Ho Chi Minh City in Vietnam, the real estate agents say.