Rent Increases- Sign of Growth or Bad for Business?

Phnom Penh: As the emerging economy and more favorable investment climate have increased the number of businesses, especially after the presence of Chinese investors have come to invest in doing business, especially in the real estate sector.

As a result of the growth of new businesses, the demand for rental rates also increased, and due to non-proportional supply, some businesses have been forced to move.

Coffee shop owner Thich Nam said that the increase in all types of businesses has led to increased rental demand. Increasingly, rents are also rising, causing some business owners to be relocated because they can’t afford the costs.

“Currently, renters have increased competition and are facing challenges,” he said. ” The location I rented, if the landlord leased to others, would be not less than $ 2,500 a month. Now I rent only $ 2,000, and if the contract ends I couldn’t pay more”.

“I have a contract with the owner for five years, a month, costs $ 2,000,” he said. “In addition to paying the location and paying salaries for staff and other expenses, the costs of the location is too high “.

Similarly, Western Motor Garage repair shop owner Ms. Ros Chanvath also said that operating a business at the current location means it is difficult too make a profit, because the rent is too high.

“My business premises used to cost $ 700 a month, but now has gone up to$ 1,500,” she said. The contract is nearing completion. ” “When signing a new contract, if rent continues to rise, I will have to look elsewhere,” she added.

Mr. You Heng, owner of a car repair shop on Street 217, said he had rented the premises for about 10 years.

“I rented this place from $ 300 then $ 500 per month and now it’s $700,” he said.”But I still rent because the customer knows our place and does not want us to move, but at the end of the year, the fee will go up to  $1,500. I am not ready to relocate outside the city”.

Va Virak, Cambodian real estate expert and head of Century 21 Fortuna Investment, said the increase in rental rates  is because of market demand and economic development.

“We know that as the price of land increases, leasing or plots of land are also increasing,” he said. For example, land in Veng Sreng or Pochentong can be used for a factory. The area now in 1 square meter is $ 200 to $ 300 and can not be rented for $ 2 to $ 3 per square meter as before. This is the evolution of economic growth. ”

He added that some young or new entrepreneurs will find it hard find affordable rent rates in Phnom Penh.

However, he also suggested that if the business owner understands that the location can be rented and the buisness is successful, it is advisable to have a long-term contract in order to avoid the costs when renewing.

“In general, if we understand that when the rent is reasonable, we should make a long-term contract, because it can protect the business,” Va Virak said.

“There are some places that are contracted for 15 or 25 years, and if we rent for 3 or 5 years, it’s not so good. No, there may be a higher risk because renting costs may be higher, while our short-term business has not yet grown. This is a problem. We can not blame the real estate owner if the price of land or real estate in the market is high,” he said. “If (the market demands), the rental price goes up. ”