Cambodia’s real estate sector saw remarkable growth last year, with the Ministry of Land Management, Urban Planning and Construction (MLMUPC) approving a total of 3,418 projects nationwide.
The combined value of approved investments in the construction sector increased by 22 percent year-on-year to $6.8 billion. In 2017, residential projects accounted for 82 percent of all approved projects, while commercial projects represented only 8 percent of the total.
The approved projects in 2017 will offer more residential and commercial supply this year, which is likely to have a huge impact on the rental market, particularly in the condo, office and retail sectors.
Condo rental market: Lower occupancy, rentals predicted
According to the 2017 CBRE Q4 report, by the end of the fourth quarter in 2017 the Phnom Penh condominium supply reached 8,600 units, representing an increase of 108 percent compared with the end of 2016.
Approximately 63 percent of total stock at the end of the fourth quarter was categorised as mid-range, with more than 5,000 units having been completed.
Condominium rents in prime locations were broadly stable over the course of 2017. Rents of high-end condominiums in prime locations ranged between $14 and $18 per square metres per month, while those in the mid-range segment were between $11 and $15 per sq m.
Affordable condominiums in prime locations achieved rents in the region of $10 per sq m.
Ann Sothida, CBRE’s country director in Cambodia, said: “The condo market in 2017 was healthy with an occupancy rate of approximately 85 percent; however, the market may need time to absorb new supply so we think the occupancy rate is likely to be lower in 2018.”
She said that in 2018, there will be an additional supply of 13,000 condominium units, in addition to 1,200 units of serviced apartments.
“The supply by 2018 will increase by 87 percent from 16,300 units to 30,500 units,” she said.
Given the significant residential supply in the pipeline, she said residential rents are likely to drop by roughly 10 percent in 2018.
Office rental market: Rents expected to increase
The year 2017 witnessed growing demand for good quality office space from both local and foreign occupiers, with much of the large space being occupied by multinational companies. This resulted in vacancies in the Grade B sector, falling to about 10 percent over the year.
The CBRE report says that by the end of the fourth quarter in 2017, the supply of modern office space in Phnom Penh had increased by 11 percent year-on-year and 2 percent quarter-on-quarter. In the fourth quarter of 2017, occupancy across the sector stood at 82.7 percent, the highest rate since early 2009 and approximately 160,000 sq m of office space is under construction and due to be delivered during the coming 24 months.
Centrally owned offices accounted for 36 percent of future office supply, while strata-title buildings represent the majority of under-construction office projects with a total leasable area of about 105,000 sq m.
Ms Ann said: “Average quoting rents for modern offices across all grades rose by 1 percent in the year to December 2017. Quoting rents of Grade-A buildings remained at between $28/sq m and $38/sq m per month.
“Average quoting rents across all grades were broadly stable over the fourth quarter when compared to the third quarter, however rents of Grade-B buildings in non-CBD locations appreciated by 4.4 percent in the fourth quarter compared to the third quarter in 2017,” she added.
As demand for commercial office space remains strong this year, in addition to current office supply pipelines, Ms Ann expects that office rents will also slightly increase this year.
Haijun Zeng of Tings & Associates Co, Ltd said: “The outlook for the office sector is quite optimistic. Those who have done projects with professionalism such as Exchange Square will surely be rewarded.
“And for those who aren’t so professional, it really won’t do as it always would in the residential sector. I reckon the office sector in 2018 is more of a question of professionalism than that of demand and supply.”
Retail rental market: New construction will double
current retail supply
By the end of the fourth quarter in 2017, approximately 300,000 square metres of modern retail space was under construction or planned and when finished will double the current retail supply over the course of the coming 24 months, according to the CBRE report.
Prime retail rents were broadly stable over the course of 2017 compared with the previous quarter, with no significant changes found at prime shopping malls or community malls.
The highest quoting rents were due to prime retail podiums, which topped the market at $65 per sq m per month.
Ms Ann said: “An addition of about 200,000 sq m is going to be delivered across seven projects in 2018, which will double the figure of the current supply.
“This new supply is predominantly driven by a combination of new shopping complexes developed by international groups and significant retail components within residential led mixed-use schemes.”
However, since the retail developments that will add to the market in 2018 are quite spread out to the second CBD and other locations and demand remains strong, Ms Ann anticipates that over the course of 2018, retail rents will remain stable compared with those of 2017.