The capital city is facing a surge in vacant retail space, a figure that has been expanding over time but with the onslaught of food delivery apps and e-commerce, and the ongoing risk of Covid-19, how will it all pan out?
A while ago, businesses started to disappear from WB Arena, a sprawling $10 million riverside development in the capital’s Chak Angre dust swirling commune as the effects of the Covid-19 pandemic dug into people’s pockets.
Built by logistics tycoon Sear Rithy’s development arm Worldbridge Group (hence the WB acronym), the project had Singapore’s famous Clarke Quay in mind when draft plans were drawn up, with the hope of evoking that quayside feel.
However, a few short months of its launch in late 2019, businesses came under pressure as footfall waned on the back of an intermittent spike in coronavirus cases.
Managing director Simon Griffiths of The Mall Company, which oversees a $20 million retail asset portfolio in Cambodia, including WB Arena said occupancy used to be 68 per cent prior to Covid-19.
New tenants were ready to set up shop and a list of marketing activities and events was planned when the pandemic forced a pause on it, dragging occupancy down to 50 per cent.
The slowing consumption at physical shops is largely a phenomenon of Covid-19 and perhaps to a small extent, a consequence of rising e-commerce and food delivery apps.
For some businesses, particularly food and beverage operators, serving customers via digital platforms helped them sustain in the downturn, as in the case of Park Café Food and Beverage Co Ltd, a locally-bred food chain.
General manager Heng Sengly said sales had dropped about 60 per cent since the latest wave of community transmission but online orders only dipped marginally.
In Phnom Penh alone, the gross merchandise value for the food delivery market stands around $16 million to $18 million annually.
Figures shared by The Mall’s retail insight showed that Phnom Penh’s vacant retail space rose 85 per cent year-on-year to 16,247 square metres (sqm) as at end-December, 2020, whereas total retail space supply stood at 370,781 sqm last year.
Out of the vacant space, F&B accounted for 58 per cent, followed by fashion (21 per cent) and health and beauty (nine per cent).
In addition, community malls saw the highest unoccupied retail space at 9,565 sqm, ahead of shopping malls (3,091 sqm) and retail podiums (2,351 sqm).
What this shows is that rental rates on average across Phnom Penh has suppressed 20 to 30 per cent from pre-Covid-19 levels.
At some retail properties, rents have remained stable with zero to 10 per cent drop while at others, as much as 50 per cent lower rates were experienced, Griffiths shared.
Overall, some 500,000 sqm NLA of retail supply will stream into the market between now and 2023, UK-headquartered real estate consultant and agent Knight Frank’s statistics showed. By then, total NLA would have ballooned to 909,008 sqm.
Similarly, CBRE Cambodia, an affiliate of US-based commercial real estate services and investment firm CBRE Group Inc, which recorded just over 400,000 sqm of retail supply in Phnom Penh last year, sees a strong uptick in vacant spaces, particularly in retail podium and shopping malls in 2021.
But what is to come of all this, is unclear. Real estate agents show relative optimism, acknowledging that “everyone is struggling” but at the core of it, the amount of vacancy remains a huge reckoning for the real estate sector.
The short-term outlook is likely to be weary as supply piles on, doubling present figures, assuming all projects complete as scheduled, Knight Frank wrote, but could it last longer? Only time will tell.