cellcard cellcard cellcard

CBRE research outlines state of office space rental sector

Sok Chan / Khmer Times Share:
New blocks in Phnom Penh. Occupancy rates have fallen to the Kingdom’s lowest level since 2016, according to a report. KT/Mark Hughes

CBRE Cambodia research indicates that 2020 saw occupancy rates fall to 76.5 percent, the Kingdom’s lowest level since 2016.  The drop was almost 8 percent year on year, with rents falling back in most sectors.

Two factors contributed to an increased gap between supply and demand in the Phnom Penh office market. First, there was a substantial increase in new supply after several years of increasing rents and falling vacancies. Secondly, there was a reduced level of demand brought on by the COVID-19 pandemic.

This year the future of the sector is set to be affected by a range of shifting trends.  These include further increases in supply and the changing face of business in the Kingdom.

Last year, Phnom Penh saw 11 centrally owned office buildings completed. This addition equated to 125,500 square metres (sqm) of office space, a 34 percent increase compared with 2019.

However, with most companies putting key decisions on hold, the average size of office space transactions in Phnom Penh fell by almost 31 percent, from 270sqm to 187sqm over the course of the year.

In 2021, centrally owned offices supply has largely been completed already. With fewer completions forecast out as far as 2024, the market has some time to recover. However, the strata-title sector is set to deliver a record amount of new space, with more than 180,000sqm coming onto the market via six projects. This represents a 166 percent increase in strata-title format office space, on top of the 33 percent increase registered during 2020.

Together this will push total supply over the one million sqm mark by the end of the year.

Strata title is a form of ownership devised for multi-level apartment blocks and offices and horizontal subdivisions with shared areas. The word “strata” refers to accommodation being on different levels.

Strata Title Schemes are composed of individual lots and common property. Lots are either apartments, offices, garages or storerooms and each is shown on the title as being owned by a lot owner. Common Property is defined as everything else on the parcel of land that is not comprised in a lot, such as common stairwells, driveways, roofs, gardens and so on.

In 2020 the market exceeded the symbolic level of 500,000 sqm of centrally owned office space, which increased competition between landlords.

The most recently completed centrally owned office buildings have set modern, higher-quality standards for the real estate market in Phnom Penh, making older stock pale in comparison.  Ultimately this forces owners to plan full refurbishments on older stock just to keep up.

Last year, saw an overall decrease of rents. However, this general trend hides disparities, with a significant adjustment of rents within the Grade B market range whereas Grade C experienced stability, benefiting from an occupiers transfer to affordable options, said Advisory and Transaction Services Manager at CBRE Cambodia Ludovic Hautin.

He added that the market is forecast to remain stable during the first part of 2021 and then start to increase. Hautin said that the flexibility currently offered by landlords will enhance occupiers’ ability to secure favourable financial positions for the next few years, helping the market recovery.

“It will take years to reach the levels of late 2019 before COVID-19”, said Hautin.

He added the Cambodia market is now mature enough to face real asset competition and the sector is now directly affected by the worldwide economic situation that will need time to recover after the pandemic.

Hautin added: “Overall, there are good reasons to remain optimistic, competition is always a positive component to improve market standards and Cambodia is probably one of the best places to be in terms of real estate with a very good sanitary situation and an outstanding potential for growth.”

Related Posts

Previous Article

Rice exports will not increase during first quarter, says federation

Next Article

Institute begins training students in technical skills