A landmark year for construction investment and real ...€¦ · PHNOM PENH OFFICE Q4 2016 Source: CBRE Research, Q4 2016 Figure 7: Future Office Supply Under Construction / Announced

CambodiaPart of the CBRE affiliate network

MARKETVIEW

A landmark year for construction

investment and real estate FDI

Phnom Penh, Q4 2016

© CB Richard Ellis (Cambodia) Co., Ltd 2016 | 1

Prime Apartment Rent$21.9/SQM

Prime Retail Mall Rent$36.5/SQM

Q4 2016 CBRE Research

Average High-end Condominium Price$3,131/SQM

Prime Office Rent$22.4/SQM

OVERVIEW

Data recently released by the National Bank of Cambodia confirms that Foreign Direct Investment (FDI) reached US$2.15 billion during 2016, a 25% uplift when compared to 2015. China remains the country’s largest source of FDI, but with a significantly reduced share of the total, down from 61% in 2015, to 35% in 2016.

FDI into real estate totaled US$370 million, representing 17.2% of the total. Investment into approved construction projects increased by approximately 12.4% over the fourth quarter, ending the year at US$8.5 billion, up 143% on 2015.

During October, a visit by Chinese President Xi Jinping resulted in the agreement of almost US$2 billion of infrastructure investment and aid to the country, including a $1.9 billion highway project linking Phnom Penh and the port city of Sihanoukville.

The fourth quarter saw a continued slowdown of condominium project launches, together with downward adjustments in ‘high-end’ condominium quoting prices. Meanwhile quoted prices in the ‘mid-range’ and ‘affordable’ segments continued to hold up well.

Grade-B and Grade-C office rents diverged further, with Grade-B quoting rents recording a Y-o-Y increase of 11.2%, whilst Grade-C depreciated 1.2% over the course of 2016.

HIGHLIGHTS

Cambodia’s FDI totaled US$2.15 billion in 2016, representing a 25% increase from 2015. The top three recipient sectors for FDI are banking, manufacturing and real estate.

Nationwide, investment into approved construction projects reached $8.5 billion across 2,636 projects by the end of 2016, an increase of 143% on 2015, which saw $3.5 billion invested in 2,305 projects.

Grade-B office’s average quoted rents appreciated by 2.2% q-o-q and 11.2% y-o-y. Average quoted rents of Grade-C offices slightly depreciated by 0.4% q-o-q and ended the year down 1.2%.

616 condominium units were launched across two off-plan projects during Q4; representing the lowest level of new launches seen during the last two years.

Figure 1: Sources of FDI Inflow and FDI Value (2012-2016)

Source: National Bank of Cambodia, Q4 2016

*Arrows indicate change from previous quarter.

$ .0 Bn

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China Vietnam Japan

Singapore Other FDI (Bn USD)

MARKETVIEW


PHNOM PENH TO WITNESS THE FIRST LARGE

WAVE OF CONDOMINIUM SUPPLY IN 2017

Phnom Penh’s condominium supply is due to increase significantly during the next 12 months.

Over the course of 2017, more than 8,000 units are

set to complete, accounting for an approximate 200% increase on supply levels as of Q4, 2016.

An additional 13,000 units are scheduled to be delivered during 2018, representing a five-fold

increase from the current market position. By 2018,

CBRE estimates that 47% and 34% of total condominium supply will be attributable to the

‘mid-range’ and ‘high-end’ segments, respectively.

AVERAGE SALES PRICES DEPRECIATED ACROSS

‘HIGH-END’ SEGMENT IN Q4

Average quoted prices in the ‘affordable’ and ‘mid-

range’ segments increased marginally over the

fourth quarter. ‘Mid-range’ condominiums rose by 1% q-o-q, whilst prices in the ‘high-end’ segment

dropped by 1.8% q-o-q.

Overall, during 2016 the average quoted sales price

saw an increase across all grades compared to the

previous year. ‘Affordable’, ‘mid-range’ and ‘high-end’ segments rose by 4.7%, 2.9% and 3.5% y-o-y,

respectively.

FUTURE CONDOMINIUM PROJECT LAUNCHES

TO TARGET MIDDLE INCOME HOUSEHOLDS

Two off-plan projects, totaling 616 units, were

launched in Q4, which was significantly lower than

the number of new launches in previous quarters, and a continuation of the pattern seen in Q3, 2016.

We anticipate the persistence of this trend over the

coming year.

Furthermore, it is worth noting that both projects

launched during Q4 are located outside the capital’s prime residential areas and that both target local

purchasers. In 2017, we expect to see new

condominium project launches focused in secondary locations and on the ‘affordable’

segment to target 'middle income households.

Q4 2016 CBRE Research 2

PHNOM PENH CONDOMINIUM Q4 2016

Source: CBRE Research, Q4 2016

Figure 4: Number of Off-plan Condominium Units Announced by District, and Number of Project Launches (Q1 2015-Q4 2016)


Figure 3: Average Price Per Sqm of Phnom Penh Condominiums (Q1 2015-Q4 2016)


Figure 2: Phnom Penh Condominium Supply by Grade (2008-2018F)

© CB Richard Ellis (Cambodia) Co., Ltd 2016 |

0

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Affordable Mid-Range High-End

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Q22015

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No. o

f Unit

s

Chamkarmon Daun Penh 7 MakaraToul Kork Chroy Changvar Sen SokPor Sen Chey Mean Chey Russey KeoNumber of Projects Launched

No. of Projects

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Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Affordable Mid-Range High-End

MARKETVIEW


QUALITY SUPPLY SET TO INCREASE

DURING 2017

Over the course of Q4, only one Grade-C office building completed, delivering approximately

4,000 sqm. Meanwhile “Hong Kong Center”, one

of the capital’s earliest purpose-built office buildings, was closed. Overall, occupancy fell by

1.5 pp compared to the previous quarter.

During the next 12 months, a total of around

65,000 square meters of office space is due to

launch, with Hongkong Land’s ‘Exchange Square’ on track to add 18,000 square meters as

the city’s second Grade-A office, by Q1 2017.

MARGINAL DECREASE IN GRADE-C RENTS

IN THE CONTEXT OF NEWLY COMPLETED

STOCK

During Q4 2016, average quoted rents of Grade-B stock increased by 2.2% q-o-q and ended the

year up 11.2%. By contrast, quoted rents in the

Grade-C segment saw a slight decrease of 0.4% q-o-q and 1.2% y-o-y; a result of relatively low

rents quoted by newly completed Grade-C stock.

Quoted rents for Grade-A space remained stable

at approximately US$28 per sqm, exclusive of

service charge.

FUTURE OFFICE SUPPLY DRIVEN BY

STRATA-TITLE PROJECTS

During the last 24 months, Phnom Penh has witnessed increasing interest in strata-title

commercial developments. We expect to see

continued interest in developing strata-title offices from both local and foreign developers.

Strata-title office projects announced or under construction constitute circa 70% of total future

office supply due to be delivered during the

coming 36 months, and will represent approximately 24% of Phnom Penh’s total office

supply by the end of 2019.


PHNOM PENH OFFICE Q4 2016


Figure 7: Future Office Supply Under Construction / Announced (Q4 2016)


Figure 6: Average Quoted Office Rental Rates (USD/SQM/Month)


Figure 5: Phnom Penh Office Supply by Grade (2008- 2016)


*Exclusive of service charge

SQM (NLA)

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0510152025

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MARKETVIEW



PHNOM PENH RETAIL Q4 2016


Figure 10: Location of Modern Retail Supply by District (Q4 2016 –2019F)


Figure 9: Quoted Retail Rental Rates by Type (USD/SQM/Month)


Figure 8: Retail Supply by Type (2007-2018F)FLAGSHIP RETAIL SCHEMES SET TO

COMPLETE IN 2017

Phnom Penh has seen no significant volume of new retail supply during the last 24 months.

However, retail supply in Phnom Penh is set to

rise significantly by the end of 2018, driven by a combination of new international shopping

complexes and significant retail components

within residential led mixed-used schemes.

‘Parkson Phnom Penh City Center’, comprising

57,000 sqm of leasable space, is now rescheduled to complete during 2017.

Hongkong Land’s ‘Exchange Square’ is on-track

to deliver 8,000 sqm of leasable space within a dedicated retail podium by the end of the first

quarter of 2017.

PRIME RENTS WERE STABLE OVER THE

QUARTER

Prime retail rents across all formats were stable

over the course of Q4, although rents in prime high street locations dropped by 1% q-o-q.

In Q4, the highest average prime rents by type were attributed to retail arcades at US$52.50 per

sqm and retail podiums at US$48.30 per sqm.

SUPPLY OF MODERN RETAIL SET TO

DECENTRALISE

As of Q4 2016, 68% of modern retail supply is

focused on 2 central districts, namely Chamkarmon and Daun Penh.

Future developments are more widely dispersed, and although Chamkarmon, the traditional

retailing heart of Phnom Penh, is forecast to

retain its crown with 28% of supply, other districts will claim a greater share. This trend is

supported by rising land prices in central areas

and greater availability of large development plots in less developed locations.


SQM (NLA)

$31.4

$48.3

$30.5

$52.5

$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00

Prime ShoppingMall

Prime RetailPodium

Prime High Street Prime RetailArcade

Rental Rate Range Average Rental Rate

Q4 2016 CBRE Research

0

100,000

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700,000

Shopping Mall Community Mall Retail Podium Other Retail

42%

26%

8%3%

4% 10%7%

Q4, 2016

28%

19%

15%1%

15%

3%

2% 9%

8%

Q4, 2019FChamkarmorn

Daun Penh

7 Makara

Tuol Kork

Sen Sok

Mean Chey

Chroy Changvar

Chbar Ampov

Por Sen Chey


MARKETVIEW



PHNOM PENH SERVICED APARTMENT Q4 2016


Figure 13: Demand for Serviced Apartments by Budget Based on CBRE’s Enquiries (2016)


Figure 12: Rental Rate Range by Unit Type and Grade (Q4 2016)


Figure 11: Serviced Apartment Supply by Grade (2010-2016)


Rental Range Per Month (Grade B)

NEW SUPPLY FOCUSES ON MID-RANGE

GRADES

The supply of serviced apartments reached 5,633 units by the end of 2016, an increase of 3.7% q-o-q and 26.9% y-o-y. Grade-B stock saw the most rapid increase in supply over the year, adding an additional 86% of 2015 supply, whilst Grade-C added 50% and became the most populous market segment.

As of Q4 2016, Grade-C or below stock accounted for a collective share of 70% of total serviced apartment supply. In addition, Grade-A and B contributed 17% and 13% of supply, respectively.

PRIME SERVICED APARTMENT RENTS HOLD

STEADY OVER THE QUARTER

Average Grade-A and B quoting rents remained stable over the course of Q4.

Rental rates across prime Phnom Penh serviced apartment stock range from US$500 Per

Calendar Month (PCM), for a one-bedroom

Grade-B apartment, through to US$8,000 PCM for a flagship penthouse unit, as of Q4 2016.

Average quoted rents for Grade-A serviced apartments ended the year at $21.02 per sqm,

whilst the average quoted rent of a Grade-B

apartment is 29% lower at $14.96 per sqm.

ENQUIRIES CONTINUE TO DEMONSTRATE

DEMAND ACROSS A RANGE OF BUDGETS

Affordable and mid-priced serviced apartments continue to be the most sought after market

segments. Only 6% of enquiries received during

2016 were seeking accommodation priced in excess of US$3,000 PCM.

69% of enquiries received by CBRE were from tenants with budgets of less than $2,000 PCM, a

trend that supports the recent increases in the

supply of Grade-B and C serviced apartments.

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Average Rent Per Sqm

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US$4,000+

MARKETVIEW

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy andcompleteness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

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For further information, please contact:

James HodgeSurveyor+855 89 333 722 [email protected]

Sambath Phal Analyst+855 92 791 750 [email protected]

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway atwww.cbre.com/researchgateway.

Muyngim Lim Analyst +855 98 331 771 [email protected]

T+855 23 964 099F+855 23 964 088 [email protected] www.cbre.com.kh

CBRE Cambodia, 9th Floor, Phnom Penh Tower #445 Monivong Blvd Boeung Prolet Quarter 7 Makara District Phnom Penh, Cambodia.

PHNOM PENH Q4 2016

Documents

A landmark year for construction investment and real ...€¦ · PHNOM PENH OFFICE Q4 2016 Source: CBRE Research, Q4 2016 Figure 7: Future Office Supply Under Construction / Announced