How is the Cambodian real estate market in the first quarter of 2024?

Recently, CBRE Cambodia released its market insights report for the first quarter of 2024. 

The report shows that Cambodia’s economy is recovering rapidly, the real estate market as a whole remains stable, and some sectors are showing a slight upward trend.

GDP Growth

According to CBRE, Cambodia’s GDP growth rate in 2024 will be approximately 5.8%.

Before this, The World Bank predicts Cambodia’s economic growth in 2024 to be 5.8%; the International Monetary Fund (IMF) predicted Cambodia’s economic growth rate to be 6.1%, making it the fastest growing economy in Southeast Asia in 2024.

In addition, according to a report recently released by The Council for the Development of Cambodia (CDC), it has approved 106 new investment projects and production expansion projects with a total investment of US$2.2 billion, an increase of 67 projects, while the total investment capital increased significantly about 649% compared to same period last year.

Among them, there are investments from China, Singapore, Vietnam, South Korea, the United Arab Emirates, Malaysia and other countries, covering various sectors such as industry, agriculture, tourism, and infrastructure.

All the above data and performance show that Cambodia’s economy is recovering rapidly.

Tourism Drives the Growth of Hospitality Sector

As a mainstay industry, Cambodia's tourism continues to recover and grow, providing boost to overall economic growth.

According to CBRE data, nearly 1 million of total international tourists arrived at Phnom Penh International Airport and Siem Reap International Airport in the first quarter of 2024. Although there is still a certain gap compared with the same period in 2019, it has increased significantly compared with the same period in 2023.

At the same time, international flights to Cambodia are also on the rise. According to the SSCA spokesman Sinn Chansereyvutha, as of the end of February this year, the number of flights at Cambodia’s three international airports had increased slightly, reaching 168 flights per day.

In addition, direct flights between Cambodia and the United Arab Emirates, India and other countries will soon be launched.

To support the "Cambodia-China People-to-People Exchange Year ", China Southern Airlines, Air China, Shenzhen Airlines and other Chinese airlines have also increased flights to Cambodia.

At the same time, Cambodia’s domestic tourism market is also growing. According to the Ministry of Tourism, Cambodia received more than 13 million national and foreign tourists during the three-day of Khmer New Year.

With the rebound of tourism sector, hotel occupancy rates have achieved slight growth, with three-star hotels experiencing the fastest recovery.

Office Market Remains Stable

Retail Market Slightly Sluggish

According to CBRE data, the average office occupancy rate in the first quarter was 62.2%, and it is expected that there will be approximately 171,000 square meters of new supply in 2024.

In terms of rental, the rental prices of offices remained stable overall. However rental prices of Grade B- and Grade C offices in Non-CBD areas fell by 5.1%-7.4% year-on-year.

There are a wide gap between asking and achieved rent price in the actual rental market. 

CBRE’s report states that, in an increasingly competitive market, landlords are willing to negotiate on prices to attract tenants. Besides price, these negotiations often extend to various incentives, further enticing potential tanants.

For retail market, the average occupancy rate in the first quarter of 2024 was 63.4%, a decrease of 9.4% compared to the same period in 2023. 

At the same time, rents in various retail such as shopping malls and community malls is yet to recover as the overall trend is still declining.. In terms of new retail supply, it is expected that more than 101,000 square meters in 2024.

In addition to data, there are currently three major trends in Cambodia’s retail industry:

First, The rise and fall of weekend markets.

Weekend or night markets have seen a surge, drawing large crowds. This successful model is easily duplicated. However, these markets are now experiencing a decline in visitor numbers.

Second, Hybrids of sales (physical & online) 

Shopping malls are expanding their reach beyond physical stores. There is a trend of utilizing online platforms and social media to promote sales, catering to the digital consumer's convenience and accessibility needs. This strategy broadens customer base and increases sales opportunities.

Third, Clearance sales to attract footfalls 

Major malls are hosting clearance sales with a wide variety of discounted items. These promotions serve dual purposes: boosting sales and attracting increased foot traffic.

Residential Market Remains Stable Overall

In terms of supply, completions of both apartment and landed properties products are continue to increase while the new launches remain slow in the first quarter of 2024, and the new supply mainly mid-range and affordable products.

The selling prices of condominium products were generally stable, with a slight increase. Among them, mid-range condominiums increased the most, up 3.9% year-on-year.

CBRE’s report pointed out that, new condo completions continue to pressure the rental market. Unit owners are facing a larger pool of competition, hence are more willing to consider lower prices to attract tenants. As the competition in the leasing continue to be intensified by new completions, developers are adjusting the rental rates for completed units operating under GRR scheme. The demand from both short and long stay observed to be responsive to the rent corrections.

The serviced apartment market is relatively stable. There are more than 4,200 units completed as of first quarter 2024, most of which are located in the core districts such as BKK, Chamkarmon and Doun Penh.

The average rent shows a slight upward trend. The average rent of Grade A serviced apartments in Phnom Penh is about $20/sqm/month, with the highest exceeding $40/sqm/month. The average rent of Grade B service apartments is about $13/sqm/month, with the highest being nearly $35/sqm/month.

In conclusion, driven by the recovery of the tourism industry, Cambodia's economic development overall improved in the first quarter. With the continuous advancement of major infrastructure projects, Cambodia will usher in more investment.

Although the real estate market is still in a stable state, it will improve under such general trends.

On the occasion of presiding over the inauguration ceremony recently, Prime Minister Hun Manet reaffirmed his commitment to attracting investors to Cambodia to building more modern and affordable housing. He believes that the real estate industry will recover in the near future.