CBRE: office rental rate begins to drop from this Q2 onward

Occupancy rates of office rental business began to decline from this month, after remaining robust in Q1. Whereas, the new rental rates will also begin to decline towards the end of the year, after initial upward movements only a month before the COVID-19 eruption. The dropping trend in rent rates is likely to reverse the increasing supply of new office space which saw a stagnated trend earlier this year but will increase significantly by the end of 2020.

This increasing supply will lead to an increasing vacancy rate, resulting in significant pressure on the rental market prices and sale of commercial offices. This effect will eventually force building owners to reduce rental fees. According to a report by CBRE that recently predicted the real estate market.

As for the update of the occupancy rate, CBRE reported that the outbreak of COVID-19 caused a slight decline in the number of occupants and remain stagnated in the first quarter, which is less than 1% compared to the same quarter last year.

However, the rate is predicted to increasingly trend downwards at a rapid rate for the rest of 2020 due to delayed project completions and due to a decline in investor confidence.

Despite the Covid-19 pandemic, the rents are currently stable, but the short-term discounts are expected in various places, as tenants gain more negotiation power.

While the quoting rent is also expected to adjust downward from Q2 onward.

In terms of new rental rates, an initial upward movement was observed in January, a little increase one month before the outbreak of the COVID-19. The rate has been steady for about three months due to the previous competitions of tenants and some office owners have begun offering discounts.

However, from this month onward, the number of new tenants renting or buying new offices may continue to decline, which will put more pressure on property owners, inevitably, to make further discounts.

There was no new completion or launches of both Phnom Penh centrally-owned office and strata-title office during the first quarter of 2020.

However, there is one newly launched project— Central Capital Tower in Toul Kork District which added circa 24,800 square meters to the strata-title supply pipeline. By the end of 2020, approximately 86,000 square meters is expected to join the supply, which will pressure the rent even more.(This news came from Construction-Property.com)