Commercial real estate market sees shops moving to high-end streets
In Phnom Penh, visibility seems to have become key to retailers. High-end brands are reportedly moving to more up-market locations like Prime High Street, versus community malls, retail podiums and prime shopping malls.
These locations could rent anywhere between $26-$33 per square metre per month. As per data from CBRE Cambodia Research, in the first quarter of 2024, there was a 9 percent increase in commercial rentals in high-street. This compares to flat growth for shopping malls; and a decline in rentals at community malls and other places.
“As the market matures, you are seeing more interest and focus in quality,” said Sorn Seap, president, Cambodian Valuers And Estate Agents Association (CVEA).
Average occupancy rate in retail commercial space has been going down over the years. From an occupancy rate as high as 90 percent in 2019, currently the occupancy rate is 63.4 percent in the first quarter of 2024.
Also there is another additional 101,000 square metres of new commercial retail space expected to become available in 2024. This means it would be a renters’ market where the renter holds the upper hand and more bargaining power than the landlord. It could also explain how retail brands are able to move to more high-end locations if there is a possibility of discount pricing and other incentives offered by landlords.
This trend of wanting to be in better premises continues even in the office rentals. Even for MNC corporate offices and mid-cap companies in Phnom Penh, there is a preference to rent grade-A properties where the rent is between $28-$30 per square metre per month. As per CBRE data, such prime grade-A office property saw an increase in rentals of 2.9 percent.
This was followed by some grade B properties, which are between $22-$23 per square metre per month, seeing an increase of 5.5 percent. However, there was nearly flat growth or a decline in rentals for some grade-B and grade-C properties. Grade-C properties generally are quoted at $14-$15 per square metre per month.
CBRE data also showed that “the gap between the quoting rent and the discount continues to widen”. This is because of an increasingly competitive market, landlords are willing to negotiate on prices to attract tenants. Besides price, these negotiations can also extend to other incentives for potentially good tenants.
Another reason for this could be that there have been no new launches in office spaces in the first quarter of 2024, which means interested renters would have to make do with available office spaces. The average occupancy rate at commercial offices was around 62.2 percent in the first quarter.
An additional 171,000+ square metre of office space is expected in 2024. But with average rent at around $28.9 per square metre per month industry players say, it remains to be seen if the additional office space will result in lower rental rates if supply is more than demand.
