New Market Trends in Phnom Penh’s Office Properties

• 18 March 2019
• Local News
• 2101 Views

Amidst the slow growth of property markets across Southeast Asia apart from Thailand and the Philippines, the office market in Phnom Penh continues to remain strong with steady demand. Both demand and supply continue to be on a positive trend. As a result, landlords have enjoyed an increase in rental rates.

Office spaces in Phnom Penh continue to sustain growth, amidst moderate levels of vacancy. There are over 120,000 square metres of new office spaces under construction and due for completion between Q1 2019 and Q4 2021. More than half of the total supply under construction are within mixed-use developments comprised of hotels, malls or residential towers. It is expected that construction will start on more projects in 2019, which will increase the future supply completed in 2021. The office market outlook remains the same with a steady level of demand growth and rents continuing to rise, but at a slower rate.

Co-working space has continued to become an emerging source of demand in Phnom Penh, in Grade B and Grade C office buildings. As more co-working space is completed, this form of office will compete more directly with traditional office space and may reduce the overall net take-up in the coming years.

In general, the co-working space market is still in its development stage. The supply of flexible spaces has only soared since 2017 with a number of both local and foreign operators opening their doors to occupiers. At present, the demand for flexible spaces comes mainly from start-up companies that prefer shorter and more flexible lease terms. So far, the co-working operators are able to retain their tenants due to the limited number of co-working spaces available. Due to higher demand from co-working spaces, rents have increased slightly, and projects likely to come into the market are already quoting higher than current average rates for co-working spaces located along the major thoroughfares.

Overall, the average occupancy for all office grades in Phnom Penh remains high and is currently at around 80%. Gross rent figures were relatively high compared with regional peers given the economic size of Cambodia. However, the enormous potential of the market is yet to be realised as the supply of office spaces in Phnom Penh are still way less than that of other regional peers.

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