Q4 Real Estate Market Update: Where are we in the Market Circle?

• 18 January 2021
• Local News
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The real estate market in Q4 2020 remained under pressure from the COVID-19 pandemic, of which retail is the most affected, followed by the office and condominium sectors. Meanwhile, the land and Borey sectors tended to stay robust thanks to the strong financial position and high confidence of the local developers, as well as the continuous government’s effort in infrastructure development nationwide.

According to a recent CBRE Cambodia research report entitled ‘Market View Update Q4 2020: Where are we in the market circle?’ landed property or boreys are in the oversupply stage of the market cycle. Meanwhile, serviced apartments, condos, and offices (both centrally-owned and strata-title) are in the contraction stage, meaning there is more vacancies plus more completions. Meanwhile, the retail sector is in the recovery stage, where vacancies started to decrease with no new completions.

Despite the negative effect on the economy, the COVID-19 pandemic did also bring light to two real estate sectors— industrial estate and retail high street. The industrial sector is projected to boom in the post-COVID-19 period, as investors have learned their lessons and will diversity their factory locations even more; and Cambodia is one of the ideal choices.

Similarly, COVID-19 also help standalone retail or known as high street retail to expand. Due to social-distancing regulation and customer fears, the retail sector such as big shopping malls tend to get fewer footfalls. Rather, the opposite happened to the high street, which has attracted more and more customers. This will lead the market sector to a future positive trend.

The same research report also summarised the detail of each market sector as follows:

1) Condo

There were two new completions and three new launches in Q4 of 2020, adding 937 and 498 units to the market, respectively. This brought the total supply of Q4 to 25,291 units, a 3.75% q-o-q growth. The three launches are one affordable (Green Leaf Residence in Sen Sok district) and two mid-range types (Real Hope and City Light Condo in Chamkarmon). Meanwhile, the two completions include one mid-range (Bao Li Mansion in 7 Makara), and one affordable (Royal Park in Toul Kork.)

Due to the COVID-19 pandemic, the sale price of condos q-o-q fell by 1.58%, 5.89%, and 1.19%, for affordable, mid-range, and high-end condo respectively. While quoting rent price also dropped by 0.08% for high-end and 6.7% in mid-range due to less consumption caused by travel restriction.

In summary, over the course of 2020, there were a total of 17 new launches, three expansion, and eight completions. Meanwhile, another 13,016 units are expected to complete in 2021, leading to a 50% supply increase. In the meantime, sales price dropped for all categories, but mid-range saw the highest decrease of 12.38%, followed by high-end (6.19%) and affordable (3.11%). All in all, the condo market is at the contraction stage.

2) Serviced Apartment

There was one completion (Sun City Bassac in Chamkarmorn district), but no new launches in Q4, adding 112 units to the market. This brought the total supply up to 2,951 units, a 3.95% growth in H2 of 2020. Meanwhile, the rents continue to decline, 7.79% for grade A and 10% for grade B or at an average of US$2,460 and US$1,810 per month.

Similar to the condo market, serviced apartments overall for 2020 were on the downward trend with more vacancies plus more completions. This sector has been hit hard by the pandemic with the drastic drop in rents, as it heavily relies on the inflow of expats population. Even though landlords have become more flexible, this sector will recover only when travel resumes normally, which will take more time.

3) Office

There were three completions – C5 Olympia City (grade B), One Park (grade C), and Aquation (Grade C), adding 41,389 sqm more supply in Q4. Due to the pandemic, over 205,000 sqm of supply has delayed completion to 2021. The new supply and COVID-19 pandemic have put pressure on the occupancy rate, which fell by 1.76% q-o-q.

Compared to the previous quarter, the rental price also dropped by 4.66% and 4.47% for Grade B in CBD and NCBD respectively. Meanwhile, grade C saw a 7.89% and 2.31% drop for CBD and NCBD area.

Overall, for 2020, there were 12 completions with an average 18.84% occupancy rate (7.83% decrease compared to 2019). There was no increase in centrally-owned type; as developers have been focusing on the strata-title even though the demand is still uncertain. This makes this market sector stays at the contraction stage.

4) Retail

There were no new completions in Q4 and over 26,213 sqm of supply was delayed to 2021, as the retail sector is still the most hit-hard sector from the pandemic. According to Google Mobility Tracker, the retail market in Q4 on average was 17.93% below the pre-COVID-19 baseline, while occupancy also fell by an estimated of 5.49%. Rental price for the prime retail podium and community mall dropped by 5.88% and 3.3% q-o-q, while the rate remained unchanged for prime shopping and high street.

Overall in 2020, there were five completions of community malls, which increased the supply by 17.56%. While the retail podium rental rate dropped significantly by 17.87%, followed by shopping malls and community malls. Meanwhile, the high street sector received the least impact of a 1.02% rent drop.

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