For the past decade, Siem Reap’s answer to Khao San Road has pulled in the punters with cheap and cheerful fun. Now rent hikes are forcing out some of its longest-standing businesses
Phnom Penh Post, January 17, 2015
Some of the best-known bars, restaurants and shops along tourist hive Pub Street have been forced to close their doors after rent hikes of as much as 400 per cent.
Three have closed in the past three months, and more have their leases coming up for review in the next year or two.
The rent increases have been attributed to a surge in competition in the 10 years since tourism started to take off in Siem Reap.
“Everyone has to raise their game now,” said Alex Sutherland, a businessman who has taken over two of the leases and has plans to replace them with higher-end operations.
Among the businesses that have been forced to relocate are Linga Bar and clothes store Rogue, while the latest closure was expat institution The Warehouse, which poured its final draught on January 1.
Opened on a boozy dare by Scot Alan Gillam and American Jediah Byrom in February 2006, the two men decided to throw in the towel after the landlord more than doubled the rent from $1,500 per month to $5,000, with an 18-month deposit on a six-year lease.
“The rent hike and deposit meant that we would have had to change the concept and operate at a different level,” explained Gillam. “This wasn’t beyond us, but we felt it was the right time to leave.”
Martin Dishman, the owner of Linga Bar on The Passage, meanwhile, said that he was facing a 400 per cent rent hike in October last year. He chose to close and has moved the business to within the lobby of his hotel, the Hotel Be, directly opposite, where the available floor space is significantly smaller.
Speaking there, where the plate glass windows look onto the former Linga Bar, he said, “I had a good run for 10 years. Most places won’t sign a fixed deal for 10 years any more, the increases will be factored in now, so there won’t be such sudden hikes.”
The trend is for higher-end establishments that can increase the return on their products rather than rely on the “pile ’em high, sell ’em cheap” model that has characterised much of Pub Street, and which has made it difficult for those with higher overheads to compete.
Sutherland and his business partner Manfredi de Lucia took over the retail outlet Rogue after a series of hikes raised the rent to $2,000 per month for the open-plan 40-metre-square ground floor space. They transformed the space into premium ice-creamerie and coffee shop Gelato Lab.
“Competition is getting stronger and stronger, and everyone has to lift their game,” Sutherland said. “I think you’re going to start seeing more professional start-ups, with higher initial investments, people with the capital and the economies of scale needed to make it work.”
They have invested almost $150,000 into the business, with $100,000 of that going into the equipment alone. Their ambitions are just as high for the former Warehouse, whose lease they also took over. “We’re going to take it more upscale,” said Sutherland.
As Pub Street increasingly becomes the preserve of those with relatively significant levels of capital to invest, other areas are having new life breathed into them by smaller operators.
When Rogue shifted to Sok San Road, it joined an explosion of new businesses that have set up there in the past two years, with dozens of new shops and restaurants lining the narrow road.
Other areas of choice include the riverside and the new “Kandal Village” behind Central Market, which is rapidly becoming a haven for creative new businesses.
But while some have been shocked at the scale of the hikes being sought, and saddened to see old institutions go, others are less surprised.
Real estate agent Christophe Guenole said the sharp hikes are simply a normal correction and to be expected. “This is a natural effect from leases being signed 10 years ago,” he said.
“Tourist numbers have been going up, and people have been making lots of money. It’s only fair that the owners of the properties benefit from this, too.”
“Also, how can people say that prices are too expensive when there is still a market for the prices being sought?”
But while entrepreneurs like Sutherland have taken up some of the leases, others have not been snatched up.
The premises of the Indian restaurant, The Maharajah, On Street 7 – just 200 metres from Pub Street – have stood empty for the past three months, with a rent of between $2,000 and $2,500 being sought.
“The condition of the premises is important,” Guenole said. “It’s not only about location.”
And not everyone agrees that Pub Street and its environs are a guaranteed ticket to riches.
“It is not a magical location,” said Jediah Byrom. “I think fewer businesses in town make money than people think.”
One business owner, who asked not to be named, said that increased competition and increased costs means that they will have to downscale when the time comes to renegotiate the lease later this year.
“The season is shorter than it was before. Utilities, rates and rents have gone up, but our prices have had to stay the same, because otherwise how can you compete? So we take the hit on our margins.”
While the times are changing for Siem Reap’s most famous street, the market looks to some to be on the verge of settling down.
“I think we’ve hit the peak right now,” Geunole said. “We’re in a middle ground between the days when you could open a business in the middle of town with a few thousand dollars and the days when there is going to be a Burger King or a McDonalds on every corner.”