Cambodia Investment Review

Leader Talks: Marc Townsend on Cambodia’s Real-Estate Trends in 2024 & Strategic Shifts and Policy Innovations For A Soft-Market

Leader Talks: Marc Townsend on Cambodia’s Real-Estate Trends in 2024 & Strategic Shifts and Policy Innovations For A Soft-Market

Cambodia Investment Review

Marc Townsend, Chairman of CBRE Cambodia, part of the CBRE affiliate network, provided a comprehensive overview of Cambodia’s real estate market at the CBRE Cambodia 2024 Fearless Forecast event. Townsend’s keynote addressed the challenges and opportunities in a market characterized by an oversupply of projects and evolving market trends amidst a backdrop of strong GDP growth and decreasing inflation.

CBRE Cambodia 2024 Fearless Forecast.

Townsend highlighted key indicators shaping Cambodia’s real estate market into 2024, noting average occupancy rates for office and retail spaces hovering around 65%, with rental prices averaging $25 per square meter. This comes alongside an increase in the average annual lending rates for developers, now exceeding 10%. Despite these challenging conditions, Townsend pointed out the resilience of the Cambodian economy, with a robust GDP growth of 5.8% in 2023 and a falling inflation rate to around 3%.

Read more: Phnom Penh Q3 2023 Property Market Review: Adaptation and Trends Continue Amid Oversupply Pressures

Low Liquidity and Rising Borrowing Rates

A significant concern Townsend raised was the rising rate of late loan repayments, which has steadily increased since the pandemic, reaching almost 6% for personal finance and 4% for mortgages. This trend indicates ongoing economic challenges. Additionally, sectors like tourism are yet to recover fully post-pandemic, with average tourist spending declining by approximately 70%, from $140 to $40 per day. The export of garments, a major sector in Cambodia, has also seen a decrease due to reduced foreign buyer demand.

CBRE Cambodia 2024 Fearless Forecast.

On a positive note, Townsend emphasized Cambodia’s substantial infrastructure spending, including multi-billion-dollar projects like ring roads, port expansions, and new international airports, which continue to bolster the country’s economic landscape.

In the real estate sector, new project launches and completions are leading to intensified competition. Total floor space for office and retail has grown to 1.4 million sqm and almost 900,000 sqm, respectively. However, this robust supply against reduced demand has led to suppressed average quoting prices. Townsend advises developers to reevaluate their strategies, anticipating a continued downward trend over the next 12 to 24 months.

Repositioning Of Existing Properties

Commercial real estate trends include increased flexibility in rents and terms to improve office space absorption. Additionally, frequent events and updates in leisure trends aim to boost foot traffic in Phnom Penh’s numerous malls. Residential real estate trends are seeing a shift in focus from launching new projects to managing existing and unsold inventory, with a particular emphasis on catering to local buyers. This shift is accompanied by a flattening in listing and transaction pricing, especially in landed developments.

Lawrence Lennon, Managing Director of CBRE Cambodia.

Townsend also discussed the repositioning of existing properties for uses such as student accommodation and budget hotels. However, challenges in regulation, design, budget, and competition make this a complex endeavor.

Key market initiatives influencing the sector include the introduction of trust laws, tax exemptions, a buyers’ market, agency commissions, and potential incentives for first-time buyers. These initiatives are expected to impact the market dynamics significantly.

Policy Options for A Soft-Market

Speaking to Cambodia Investment Review, CBRE Cambodia Managing Director Lawrence Lennon provided key ideas for developers navigating the current soft market, Lennon suggests several policy options. A primary focus should be on diversifying Cambodia’s economy, with greater emphasis on agro-industry and value-add manufacturing. This approach supports sustainable economic growth, which in turn bolsters urbanization, quality of life, and domestic spending capacity. The importance of tourism remains, necessitating policies that protect Cambodia’s unique cultural and ecological assets.

Read more: CBRE Phnom Penh’s Real Transitioning from Traditional Villas to Modern, Sustainable Office Spaces Amid Falling Rents

Lennon also sees potential in creating frameworks to nurture future-focused industries like experimental science and medicine. This would require continued investment in infrastructure, affordable electricity, vocational training, easier access to trade, and government-to-government partnerships, such as Special Economic Zones.

CBRE Cambodia 2024 Fearless Forecast.

Property-specific strategies include improved zoning and urban planning to moderate supply and enhance Phnom Penh’s livability. This would involve making the city greener, more climate resilient, and improving architecture to suit the local climate. Marc Townsend’s and the CBRE Cambodia team insights paint a picture of a real estate market at a crossroads, with strategic shifts and innovative policy measures being key to navigating the challenges and capitalizing on the opportunities in Cambodia’s evolving economic landscape.

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