Insiders say there is an oversupply of premium office space in Phnom Penh, but lower graded office space has still been in demand and the price has remained stable in the first half of the year.
Office space in the capital is divided into three grades. Grade A is high-end office space in new buildings in good areas that are well managed. Grade B is in buildings with not as many good fittings and not as much room as Grade A. Grade C office space is defined as space in older buildings with older fittings and less maintenance by the owners.
Chrek Soknim, the CEO of Century 21 Mekong, said now more small office space has started to enter the market in the first half of this year because there are many family businesses and startup businesses coming to the capital to rent the space.
However, office space graded as B and C are still popular for customers due to an affordable price.
The Grade A space was priced from $15 to about $30 per square meter in the first half, Grade B ranged from $8 to $15 and Grade C started at $8, according to Mr. Soknim.
“The price of the office space seemed not to change much if compared with the same period last year, for the rental length is long term,” he said.
“However, I see the Grade A space is likely to be oversupplied in the market because big office buildings have entered the market, while customers’ trends goes more to Grade B and C and the price of Grade A is high,” he added.
“I think the Grade A space will be okay because there will be big companies coming into Cambodia and needing luxurious office space.”
However, he could not confirm the data relating to office space in the first half of the year.
James Hodge, a surveyor at CBRE Cambodia, said so far 2017 has proven to be a strong year for the office market, continuing on from a positive 2016.
Hongkong Land’s Exchange Square is set to deliver a further 18,000 sqm in the second half of 2017, becoming only the second Grade A office building in the city, according to Mr Hodge.
“A number of large lettings have been completed already and further Grade B space has been completed and made available to tenants. Currently it is still a landlord’s market, particularly in the Grade B segment where vacancy rates are low and rents are growing,” he said.
“Grade B continues to be the most popular grade of office targeted by tenants, particularly multi-national companies and large space occupiers,” he added.
“By the end of 2018, CBRE predicts that the office market will have grown by 136,500 sqm, or 44 percent, from the figure seen today.
“Grade C offices will make up approximately 52 percent of supply, down from 61 percent currently. This is because much of the focus from developers has been towards delivering offices of a higher grade, particularly Grade B, which will see its share of supply grow to 32 percent from 27 percent today.
“Grade A stock will grow from 11 percent to make up 16 percent of the market.
“Over the longer term, demand has broadly kept pace with office supply since modern office stock first appeared in the market.
“However, over the next two years supply will be increasing at a faster pace than previously witnessed, and much of that which is to be delivered will be in a strata-title format.
“Strata-title offices present quite a different investment and occupation profile to traditional centrally owned offices which have been seen in the market to date, and as a result have their own opportunities and challenges,” he predicted.