Rents to climb in Phnom Penh office market as new supply comes online

• 1 August 2019
• Property Focus
• 2295 Views

The property market in Phnom Penh will keep growing, just as office rents have risen consistently over the past five years despite the continuing increase in the number of office spaces available in Phnom Penh.

The market today is still on the rise. Until now, there are no risk factors for the next dip. Currently, low levels of vacancies for Grade B and Grade C office spaces have led to an improvement of rental growth which, coupled with increasing number of Chinese investments in Cambodia, is creating a market that is increasingly balanced in favour of landlords. So far, demand was underpinned by companies from the banking, industrial, insurance, real estate and service sectors. These firms are prioritising the quality and location of their office spaces, even if they have to pay a little more on the rental. They value amenities and design standards, and promoting a healthy lifestyle and fostering a collaborative inclusive working environment for their staff.

In general, Chinese companies are the growing source of office demand in Phnom Penh, with some of the biggest leasing deals being from Chinese companies from all the different business sectors. Chinese investments in the development of office properties also remains strong. As Chinese nationals now comprise the largest number of expatriates with work permits in Cambodia, China’s importance as both a source of demand and investment for Cambodia’s office market will continue to grow.

On the other hand, the rising office space supply and also the rising occupancy ratio imply certain advantages for those who want to rent office space. Amid rising competition for landlords, the price of office space is expected to increase slightly, while rental/lease agreements for office spaces should become more flexible to entice tenants. Rental prices will still rise because demand for the new office spaces that come online is high. Occupancy rates will continue to be stable in the short term. This trend is expected to continue in the long term due to the continuing strong demand. At least two projects are expected to be completed this year in Phnom Penh, including Fortune Tower and Star City Office Tower. Meanwhile, office spaces recently completed include East Commercial Center, E.SUN Tower and the Keystone Office Building.

As Cambodia’s economy continues to expand at a solid pace, with the main drivers of growth taking the form of private consumptions and investments. Despite the US-China trade tensions, internal growth fundamentals remain strong due to the governmental support for infrastructure investments and foreign investments. All of the above implies an overall healthy and moderate outlook for the office market sector in Phnom Penh.

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