Office rental prices decline as supply exceeds demand

Photo by: Pha Lina
A man rides past the Icon Professional Centre on Norodom Boulevard in Phnom Penh yesterday. Though Icon has seen occupancy rise, many property managers are cutting rent rates this quarter.

via Khmer NZ

Friday, 16 July 2010 15:01 Soeun Say

SUPPLY of office space continues to outstrip demand in Phnom Penh, putting pressure on already squeezed rental prices, with rates down 25 percent in the second quarter, compared to the same of period last year, an official said.

Keuk Narin, secretary of the National Valuers Association of Cambodia and general manager of Bonna Realty Group, said yesterday that increasing office space for rent in Phnom Penh was forcing a cut in rental prices.

A quarter-on-quarter comparison of rental rates showed that 2010 second quarter prices fell 2 percent from the first three months of the year, when rates were already 10 percent lower than the 2009’s fourth quarter.

A year-on-year comparison shows office rent is between 20 percent and 25 percent lower than in the second quarter of 2009.

“This year the supply of office space for rent has increased 15 percent – much more than the demand – and I think that has pushed prices still lower this year,” he said.

The valuers association estimated that monthly rent for A-grade office space ranged between US$20 to $30 per square metre, down from first quarter rates of $25 to $35. The average occupancy rate for the first six months of this year was around 50 to 60 percent. Rental rates in B-grade offices now ranges from $8 to $12 per square metre, down from $10 to $15, with an average occupancy of about 66 percent.

Chheang Meng, general manager for Phnom Penh’s Bayon Building Center said he had slashed his asking price for office space from $17 per square metre to $12 – but buyers wanted it even lower. “Many people are looking for office space, but they need cheaper prices, and we cannot offer it to them,” he said

However, some sites have managed to increase their market share despite the slackening demand.

NVAC figures show that Icon Professional Centre on Norodom Boulevard increased its occupancy from 30 percent to 50 percent quarter-on-quarter, while Canadia Tower increased from 20 percent to 35 percent.

“It is a good sign for Canadia Tower and Icon Professional Center,” Keuk Narin said.

CB Richard Ellis (CBRE) Cambodia predicted earlier this year that office supply in Phnom Penh could reach as much as 200,000 square metres by 2013, almost double the current space, if the majority of office stock slated for development was completed.