ASEAN-Property | Phnom Penh real estate market to remain flat in 2025

 Demand across major sectors such as residential, office, retail and commercial property in Phnom Penh is likely to see only marginal improvements this year as compared to 2024, alongside stabilizing price trends, according to an international real estate consultancy at an investment seminar held in Phnom Penh on Tuesday.

Marc Townsend, Chairman of CBRE Cambodia, presenting to a group of investors and businesspeople during the firm’s annual ‘Fearless Forecast’ seminar, said that amid the subdued growth in most major segments of the market, growth in trade and increasing demand for industrial real estate nationwide indicated positive signs for the broader economy.

In its first report for the new year, the firm detailed that in 2024, investment into construction projects in Cambodia has still not recovered compared to previous years.

In 2024, investment capital in construction projects was lower than in 2023 and the previous four years; alongside less new project launches and total construction area under development, citing the Ministry of Land Management, Urban Planning and Construction’s quarter 4, 2024 data.

Meanwhile, CBRE Cambodia’s Greennet Database revealed that compared to 2023, 2024 saw an increase in the number of construction projects on hold across the capital city, rising from 13 percent of all ongoing projects on hold in 2023 to 19.5 percent last year.

Fueling this slowdown across the construction sector, and in turn the domestic real estate market, Townsend highlighted factors such as low liquidity and increased rates of non-performing loans (NPL) in the domestic finance sector; as well as slowing capital from China entering the economy, as well as Chinese tourists.

In the retail sector, CBRE forecasted that there will be no additional shopping malls launched in 2025, and only marginal increases in other types of Phnom Penh retail space this year, compared to 2024.

In 2024, total retail space in Phnom Penh was around 750,000 square meters net lettable area (NLA).

By the end of 2025, CBRE predicted tis cumulative supply will grow to around 820,000; and to just above 900,000 meters by the close of 2026.

Despite growing supply, retail rental rates in Phnom Penh continued to decrease in 2024 across grades, cumulatively dipping 2.5 percent since 2023.

The slowdown in Phnom Penh’s retail sector however was juxtaposed to strong growth in nearby markets such as Ho Chi Minh and Hanoi’s central business districts (CBD) which both witnessed over 15 percent retail price growth in 2024 compared to 2023.

Meanwhile, in the commercial sector, 2025 is likely to see a large growth in grade A office space, according to the firm’s outlook, rising from a total of around 80,000 square meters NLA in 2024, to around 280,000 in 2025.

This tripling of grade A supply comes on the back of seven major high-rise commercial developments expected to complete in 2025 and 2026.

A significant increase in strata-titled commercial property is also predicted for 2025 and 2026, increasing options for international investors outside of the slow-moving residential condo sector.

Despite this swift growth in the supply of commercial space, office rental rates across Phnom Penh moderately decreased in 2024.

CBRE’s analysis pointed out that Phnom Penh office rental rates have decreased an average of around 7 percent in 2024 across grades, compared to 2021.

However, in the same period, regional office markets such as Hanoi, Manila and Bangkok have experienced overall rate increases.

Despite setbacks in some segments, Townsend detailed that growth in the industrial sector is expected to be strong in 2025, based on positive FDI indicators in 2024, alongside strengthening national trade volumes.

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