Office Sector Update: Increasing Supply Puts Pressure on Rents and Occupancy in Mid-2023

• 18 July 2023
• Local News
• 1365 Views

In the first six months of 2023, the supply of new office buildings in the Cambodian real estate market will increase by about 39% over existing offices. From the middle of the year to the end of this year, with an anticipated addition of 215,000 square meters of office space this year, the total office supply is set to surpass 1 million square meters, marking a significant 24% growth.

The increase in oversupply and the decline in occupancy rates have had a significant impact on office rent prices, according to CBRE Cambodia’s mid-year appraisal report released on July 13, 2023.

While the office market witnessed a 2% to 4% rise in quoted rents across all grades and districts, achieved rents remained stable. Since the peak in 2019, office asking rents have undergone a notable decline of up to 20%. However, in the past 18 months, quoting rents have leveled off, and landlords have adopted alternative strategies to attract tenants. Instead of reducing rent, landlords are providing incentives such as free parking spaces, extended rent-free periods, and tenant improvements. Consequently, effective rents have remained under pressure, keeping rental rates compressed.

Daluch Chin, Senior Manager, Valuation & Advisory of CBRE Cambodia, commented on the market conditions, stating, “With the upcoming supply in the rest of 2023 and limited business expansions leading to reduced demand for office spaces, we anticipate continued pressure on rents and occupancy levels for the remainder of the year”.

As the office sector continues to evolve, industry stakeholders must adapt to the changing dynamics, recognizing the need for strategic pricing and innovative leasing solutions. The challenges posed by the increasing supply and declining occupancy rates call for a proactive approach from landlords and tenants alike, fostering a competitive and dynamic office market in Cambodia.

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