CBRE Cambodia's Phnom Penh Mid-Year Review for 2024, released on July 16th, presents a detailed analysis of the city's economic indicators and market trends. 

Despite a decline in construction investment in Q1 2024, the real estate market remains active, particularly in the office, retail, condominium, and industrial sectors. This review offers crucial insights for investors, developers, and policymakers navigating the economic landscape for the rest of 2024.

1. Office Space Market is Still Competitive

Phnom Penh's office market is still competitive, with rental rates averaging $27.00 per square meter and a 61.8% occupancy rate, comparable to major cities like Bangkok and Ho Chi Minh City.

Despite a year-on-year decline in construction investment to $786 million, the market remains dynamic, driven by Grade A and B office developments. With over 198,000 square meters of new office space expected by the end of 2024, reflecting a 31% increase, the market maintains strong demand. Trends indicate a shift towards space consolidation, sustainability, and a preference for ownership over leasing, positioning Phnom Penh's office market for robust growth.

2. Retail Supply May Exceed 800K sqm by 2025

Average rental rates for prime retail spaces are lower than in Bangkok and Ho Chi Minh City, indicating competitive pricing and growth potential. With an occupancy rate of 58.7%, the market shows steady demand.

Retail supply is projected to exceed 800,000 square meters by 2025, though take-up rates are slow, leading to delayed openings. Shopping malls dominate, comprising 45% of total retail space.

Despite these challenges, stable occupancy rates and new F&B brands drive growth. Retailers are consolidating store locations and must innovate marketing strategies to maintain footfall, pointing to the sector's adaptability and potential for sustained growth.

3. Condo Market is Slowing Down

The report notes a slowdown in Phnom Penh's condominium market, with 2,200 new units launched in the first half of the year, primarily in the high-end and mid-range segments.

Despite fewer new launches, over 2,400 units were completed, pushing the total supply to 14,000 units by year-end. This has led to competitive pricing, with high-end prices stable and mid-range and affordable prices slightly declining.

Developers are now focusing on unique living spaces and more affordable units, adapting to local buyers' preferences amid fewer international investments. The market shows potential for sustainable growth with these strategic adjustments.

4. Landed Property Market is Adjusting Prices

The landed property market in Phnom Penh has slowed, with fewer new projects launched in the first half of 2024 compared to previous years. Over 29 projects were completed, mainly in the mid-range and affordable segments, while high-end launches remained minimal.

Despite the slowdown, the supply continues to grow due to the completion of existing projects, with affordable and mid-range properties seeing the most expansion. Prices vary significantly across regions, with Chbar Ampov and Dangkor being more expensive than Kamboul and Por Senchey.

Developers are cautious, extending existing developments rather than launching new ones, while the secondary market gains influence and refinancing transactions increase due to rising non-performing loans. This reflects a market in transition, adapting to economic uncertainties and shifting demands.

5. Phnom Penh's Real Estate Market Future Trend

Phnom Penh's real estate market shows cautious optimism, with key trends shaping its future. The office market is set to stay strong, driven by supply growth and a focus on sustainability and efficiency.

Developers will likely offer more strata-titled properties and eco-friendly features to meet tenant demands for cost-effective spaces. Despite challenges, the retail sector is poised for growth, supported by new F&B brands and innovative marketing strategies to boost consumer engagement.

In the condominium and landed property markets, developers are adapting to economic changes with unique living spaces like loft units and increased interest from branded residence operators. The landed property segment focuses on existing developments and refinancing activities amid rising non-performing loans (NPLs).

Overall, Phnom Penh's real estate market is evolving, with stakeholders adjusting to market demands and economic conditions to ensure sustainable growth and investment opportunities.

Source: CBRE Cambodia

Read more:

- Phnom Penh Land Price Index (H1 2024)

- 3 Major Infrastructure Projects That Cost Over $1 Billion Each

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