CBRE issued mid-year real estate review: highlighting globalization as the key factor for the slow recovery

CBRE, Cambodia’s Leading Real Estate Appraisal Company, has just released its Phnom Penh Real Estate Market Rating Report for the second half of 2023, highlighting the impact of global macroeconomic conditions, particularly the slowdown in the Chinese economy combined with the oversupply of markets domestically, pushing Cambodia to prolong the recovery of the real estate market.

“Amidst a slowdown in the global macro environment, the kingdom experienced the repercussions of rising capital costs caused by soaring inflation and reduced consumption in Western markets, resulting in a notable 30% decline in Q1 2023 exports. Additionally, Foreign Direct Investment (FDI) flows were impacted by China’s ongoing struggles in its export and real estate industries,” said Lawrence Lennon, Managing Director of CBRE Cambodia

▲Lawrence Lennon, Managing Director of CBRE Cambodia, Picture: CBRE Cambodia

“However, as China and the world gradually reopen following the COVID-19 freeze, tourism, and business travel show promising signs of progress,” added Lawrence.

Recognizing the need for adaptability and innovative approaches, some industry actors have raised concerns about an oversupply of properties in the market, suggesting that developers consider delaying the completion of certain projects. Mr. Marc Townsend, CBRE’s Cambodia chair, proposed an alternative solution by exploring repurposing options, such as transforming properties into student or backpacker accommodations to tap into alternative markets.

Townsend acknowledged Cambodia’s effective management of the pandemic, positioning the country’s economy in a favorable position compared to many others. However, he emphasized that the return of GDP growth alone will not resolve the current excess supply challenges in the real estate market. The rapid influx of supply outpaced the demand, resulting in an overhang across various sectors that needs to be addressed. To address this issue, Townsend advised industry stakeholders to consider price adjustments, offer improved terms and conditions, or explore conversion possibilities to repurpose spaces to meet market demands.

CBRE’s research revealed a significant decrease in approved construction projects, with over 1,400 projects approved during the market’s peak in 2019, compared to fewer than 600 in 2022. This decline can be attributed to the excess supply, particularly in the higher-end property segment.

As Cambodia’s real estate market evolves, strategic adaptations and an understanding of market dynamics will be crucial for developers and industry stakeholders to navigate the challenges and seize the opportunities that lie ahead.

Source: Construction and Property