Phnom Penh’s real estate scene is navigating some intriguing waters as it heads into the latter part of 2024. According to the latest insights from CBRE Cambodia, the market is displaying signs of stability and growth, even amidst a broader slowdown in construction and rental rates.
One of the standout revelations from CBRE’s ‘Phnom Penh Market Insights Q3 2024 Report’ is the retail sector’s expanding footprint. By the end of 2024, a whopping 769,000 square meters of retail podium space is expected to hit the market, with an additional 862,000 meters slated for 2025. As of Q3 2024, 83% of this retail space is already completed, reflecting a robust pipeline despite the overall occupancy rates slipping to 58.3%—a far cry from the peak of over 80% in 2019.
Interestingly, retail rents have been playing a game of limbo, hovering close to 30% lower than their highs from five years ago. However, prime retail rates saw a slight uptick, hinting at a selective resurgence in the premium segment. Flexibility appears to be the name of the game, with landlords adapting by repurposing unused spaces and diversifying tenant mixes to attract local brands. This adaptability could be crucial for riding out the current market fluctuations.
Moving to the commercial sector, office space is seeing a slightly more optimistic narrative. The supply of office space is projected to reach 1.12 million square meters by the end of this year, with an increase to 1.34 million expected by 2025. Notably, Grade A office space has seen the most substantial growth, even as overall occupancy nudged up from 61.8% to 65.8% in Q3.
However, not all news is rosy, as Grade A rental rates dipped over 5%, now averaging $25 per square meter. Landlords are feeling the pressure to keep tenants happy, leading to a surge in incentive packages aimed at tenant retention. It’s a classic case of the market adapting to shifting demands.
The hospitality sector is also showing signs of life. By the end of 2024, Phnom Penh will welcome an additional 9,800 4-star hotel rooms and 4,200 5-star rooms—a modest increase that reflects cautious optimism. With travel slowly returning to normal, this uptick in hotel supply could signal a revival in the tourism sector.
Meanwhile, the residential market is experiencing a more muted performance. The number of new condominium launches remains minimal, with only five projects hitting the market in 2024. This is a sharp decline from previous years when new launches were booming. According to Kinkesa Kim, Managing Director of CBRE Cambodia, this drop is indicative of an ongoing market correction, driven by oversupply issues that have kept occupancy and rental rates in check.
As we edge closer to 2025, it’s clear that Phnom Penh’s real estate market is in a state of evolution. While challenges remain, the signs of recovery in certain sectors offer a glimmer of hope for investors and stakeholders. Whether this stability can translate into long-term growth is yet to be seen, but for now, all eyes are on Cambodia’s capital as it redefines its real estate landscape.
Source: CBRE Cambodia
