Cambodia real estate takes sharp turn in H1

An increase in COVID-19 cases led to more than 70% decreases in prime office and retail occupancy in Cambodia.

Office occupancy decreased by 73% whilst retail occupancy decreased by 72% in the first half of 2021 compared to the previous six months, according to CBRE Cambodia.

Prime office rents were at an approximate $23.00 per square metre (sq. m.) per month, whilst prime retail mall rents were at $33.00 per sq. m. per month.

“The first half of the year has seen prices and rents drop across most sectors, with the only real exception being the office market, where resurgent leasing demand and more competitive offers from Landlords has helped get some optimism back into the market,” said CBRE Cambodia Managing Director James Hodge.

CBRE pegged upcoming strata office average rates to have a sales price of $3,100 per sq. m., and quoting rents of $23.33 per sq. m. per month.

Approximately 117,017 sq. m. of office space is set to be completed in the capital city of Phnom Penh this year, with approximately 55% completed during the first half.

The retail market, on the other hand, struggled to recover from the drop in occupancy in the first half of the year, as 38,000 sq. m. of retail space has been completed in the first half. Another 64,000 sq. m. is expected for completion in the second half.

Average high condo sales prices fell to $2,802, whilst prime condo rents decreased to $12.35 per sq. m. per month.

In Phnom Penh alone, 7,909 completed condominium units are expected for completion this year, lower than the 10,825 forecast at the start of the year.

Quoting prices for condominiums in the high-end and mid-range market segments have fallen 6.2% and 7.1%, respectively. Rents dipped by 2.7% and 0.7%, respectively.

“The year started off with abundant optimism; Cambodia came out of 2020 relatively unscathed by Covid-19, but this took a sharp U-turn after community transmission started to increase markedly from the middle of Q1. As Q2 unfurled, Phnom Penh found itself facing a city-wide lockdown, and whilst that lockdown has ended, the relatively high volume of cases being faced and ongoing uncertainty has led to a number of difficulties for developers and investors active in the city’s real estate markets,” Hodge added.

As of the end of June, there were 50,485 recorded COVID-19 cases in Cambodia. It trails behind Singapore when it comes to vaccinations in the ASEAN, having inoculated 19.9% of its population.

“There is a glimmer of light for the real estate market, in the form of a very robust, geographically focused vaccine rollout that the Cambodian government has handled extremely competently. The majority of Phnom Penh’s populous has already received both doses, and many investors, developers and landlords are hoping this will create enough certainty in the coming months to get the domestic real estate market moving again at pace, or even potentially for international buyers to be coming back before the end of the year,” said Lawrence Lennon, CBRE Cambodia associate director and head of professional services.

Nevertheless, CBRE continued to flag the uncertainties brought about by the pandemic.

“Covid-19 has exacerbated a pre-existing issue of oversupply, and the market is now in the process of adjusting to become more competitive. As a result of the current circumstances, we see a clear drive towards more cautious, well-planned projects that take account of the future needs of occupiers, and that gives us great cause for optimism when looking over the longer-term,” said Senior Manager and Head of CBRE Cambodia’s Research and Consulting Department Kinkesa Kim.