Office rentals down 25pc as demand falls, supply rises

The SSN office building on Norodom Boulevard enjoyed high rentals in recent years. (Photo by: TRACEY SHELTON)

Wednesday, 20 May 2009
Written by Soeun Say
The Phnom Penh Post

25% Fall in office rentals
Average office rentals in Phnom Penh have dropped around 25 percent from the first half of 2008 due in part to the global economic crisis, according to National Valuers Association of Cambodia figures.

Figures from Valuers association show that commercial space is becoming cheaper, eroding rapid rental increases during Cambodia's boom years.

Average rentals for office space in Phnom Penh were down around 25 percent in the first quarter compared to a year earlier, according with estimates from the National Valuers Association of Cambodia.

Figures first released late last month at a conference in Vietnam show that office space in the capital was fetching $12 per square metre per month on average over the first three months of 2008, down from $16 per square metre over the first half of 2008.

Rentals began falling in the middle of last year after the global economic downturn kicked in, dropping to an average of $14 per square metre, the figures showed.

"Because of the impact of the global financial crisis, rentals for office space has dropped," association President Sung Bonna said.

"Now there is not much demand, but we have a big supply of office space and commercial property for rent."

Asking rentals for top office space had dropped from between $30 and $35 a square metre to between $25 and $28, he added.

The downturn comes after years of soaring rentals in the capital due to rapid economic growth amid a shortage of suitable office space.

According to the valuers association's figures, average rentals were just $6 per square metre in 2006 and $10 in 2007.

Less chasing more
Vutha Oum, director of Angkor Khmer Real Estate agreed that rentals for office space and commercial property had decreased, blaming a downturn in demand and an increase in overall supply.

At least six new office buildings had come on the market over the last couple of months, he said, and further decreases in rent were likely.

He said landlords were reducing rentals to attract clients. "Some owners of office buildings have tried to offer discounts of up to 50 percent but they are still finding it hard to get clients," Vutha Oum said.

Sear Chilin, director of Visal Real Estate, said it was unlikely that all available office space would be taken because Cambodia's business environment was "unstable".

Chun Keng, general manager of a new building on Monireth Boulevard in Stung Meanchey district, said he had been unable to fill his three-month-old building despite reducing rents between 40 and 50 percent to $5.50 per square metre.

"I haven't got clients even though I have discounted prices between 40 and 50 percent," he said.

Mony Sokha, managing director of an office building on Sihanouk Boulevard in Boeung Raing district, said discounts had helped him attract some tenants.