Vijian Paramasivam
The retail mall landscape in Phnom Penh, once a symbol of urban prosperity, is grappling with multiple challenges as traditional brick-and-mortar shopping loses ground to e-commerce, a trend exacerbated by economic and geopolitical pressures. Kinkesa Kim, Deputy Managing Director of CBRE Cambodia, a real estate services firm, spoke with the Cambodian Investment Review to shed light on the changing market dynamics and how developers are pivoting to survive and even thrive in these trying times.
According to Kinkesa, Phnom Penh has seen an explosion of retail projects that has led to an oversaturated market, creating a mismatch between supply and demand. “Developers often conduct feasibility studies that initially seem promising. The problem arises when a nearby developer decides to build a similar project, thereby diluting the potential customer base,” she explained.
Read more: Unprecedented Growth as Phnom Penh’s Retail Real Estate Supply Booms in 2022
Kinkesa highlighted some worrying trends in occupancy rates that signify the issue’s gravity. Data from CBRE reveals that while office occupancy in Phnom Penh stood at a healthy 85% before 2018, that figure has plummeted to 58.3% in mid-2023. Retail occupancy has similarly dropped, moving from 70% to 68.5% in the same period. “Launching a mall with a low occupancy of 20 to 30%, as is the case with some ongoing projects, discourages repeat visits from customers who find their first experience lacking,” she warned.
Phnom Penh’s Skyline Is Already Enveloped By 51 Completed Retail Spaces
These trends are not occurring in a vacuum. Global factors such as geopolitical tensions, a volatile financial sector in China, and a shift to online shopping among younger generations are aggravating the local market’s woes. Moreover, Kinkesa underscored the long-term impact of inflation, rising interest rates, and reduced consumer spending. “In light of these various factors, we expect the next one to two years to be quite challenging. We’re advising our clients to be adaptable and set realistic expectations,” she said.
In terms of existing retail projects, Phnom Penh’s skyline is already enveloped by 51 completed retail spaces, comprising 650,000 sqm of net leasable area. Add to this another 72 projects under construction, adding 890,000 sqm more. Eight additional projects are in the pipeline along Hun Sen Boulevard, where mega malls like AEON 3 and Chip Mong 271 are located. These new developments indicate an exceedingly saturated market relative to the city’s population density.
The solution, Kinkesa suggests, lies in adaptability and repurposing of mall spaces. “If a mall was initially designed to allocate 70% of its area for food and beverage outlets and 30% for leisure activities, these proportions must be revisited. We’re advising developers to be more flexible in the use of their space,” she advised.
Shifting Focus Toward Integrated Multiple Community-Focused Facilities
Examples of this flexibility can already be seen in Phnom Penh. Fun Mall in Boeung Kak II has shifted its focus toward community needs, offering sporting facilities like football and basketball courts to attract younger visitors. Similarly, K Mall in Veng Sreng and the Green Community Mall in Khan Sen Sok have integrated multiple community-focused facilities to diversify their offerings. The 55-storey Peak mall has gone even further, launching a “Nomadic Culture” initiative to blend shopping experiences with elements of Cambodia’s rich cultural heritage. “While these changes don’t necessarily spike revenues, they certainly improve footfall and enhance tenant satisfaction,” Kinkesa said.
The concept of repurposing malls is catching on globally as well. In other parts of the world, “ghost malls” are being converted into community spaces such as churches, healthcare centers, libraries, and even educational institutions. E-commerce growth has also led some mall operators to turn underused retail space into delivery hubs or micro-warehouses.
Given this complex backdrop, Phnom Penh’s malls are at a crucial juncture. Developers are increasingly recognizing the need to transition from purely commercial spaces into multifunctional, community-centered environments. The focus is gradually shifting from mere revenue generation to sustainable, long-term community engagement, setting a new course for the real estate sector in Cambodia’s capital and potentially serving as a blueprint for similar markets across Southeast Asia.
