New Shopping Mall Construction Overshoots Local Demand

• 25 July 2020
• Local News
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The number of shopping malls has been increasing rapidly while the local demand and average purchasing power have yet to catch up, indicating that the retail market in Cambodia is oversupplied, according to a Nikkei Asian Review report on 24 July.

Real Estate Consultancy Knight Frank predicted that by the end of 2022, the total retail stock could shoot up to approximately 830,000 sqm, 84% of which will be ‘prime grade’ or within major retail malls.

CBRE Cambodia also predicted that by the end 2020, the retail market in Cambodia would have at least 87,000 square metres of new lease area in the supply. (Read more)

However, when compared to the population of the middle class and the average purchasing power, this huge amount of upcoming retail lease area is far oversupplied.

According to 2018 figures from Knight Frank, the retail space per capita in Phnom Penh is equal to those in Hanoi and Ho Chi Minh City. In contrast, the per capita GDP in Phnom Penh is 40% less.

Moreover, a recent survey revealed the average cost per shopper in Cambodia is only US$18, and 57% of shoppers in Cambodia are low-income earners (salary from US$100 to US$ 500/month). Only 8% are middle-income earners, and about 7% are high-income earners.

Given these factors, the number of upcoming malls (84% of which are prime grade) might overshoot the demand of the local shoppers (largely low-income earners) who go to the malls only for FB and entertainment purposes rather than buying expensive brand name products.

Country Head for Knight Frank Cambodia Ross Wheble echoed the analysis that there will be quite a significant oversupply in the retail market in Cambodia.

“When there is an oversupply, the occupancy rates will go down, I think landlords are going to start to offer quite big incentives on rent,” Mr Wheble was quoted as saying in the Nikkei Asian Review.

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