Office space keeping up with demand

Office space in Phnom Penh in the first quarter of 2017 saw an increase due to the new supply coming into the market, while what’s known as Grade B office space still continues to be popular with tenants, according the latest report from CBRE Cambodia. 

Grade A office space is high-end space in new buildings in good areas that are well managed. Grade B is in buildings with not as many good fittings and not as much room as Grade A. Grade C office space is defined as space in older buildings with older fittings and less maintenance by the owners.

At present, office supply across Phnom Penh totals 308,500 square metres, having increased 5.4 percent during the first quarter of 2017, with two Grade B office buildings having been delivered, according to the report. 

Hongkong Land’s Exchange Square is set to deliver a further 18,000sqm in the second quarter of 2017, becoming only the second Grade A office building in the city.   

James Hodge, a surveyor at CBRE Cambodia, said that so far 2017 has proven to be a strong year for the office market, continuing on from a positive 2016. 

“A number of large lettings have been completed already and further Grade B space has been completed and made available to tenants,” he said. 

“Currently it is still a landlord’s market, particularly in the Grade B segment where vacancy rates are low and rents are growing.  

“Grade B continues to be the most popular grade of office targeted by tenants, particularly multi-national companies and large space occupiers. Average rents in the Grade B sector increased by 11.2 percent over the course of 2016, whereas average rents for Grade C offices shrank by 1.2 percent over the same period,” he added.

Taking into account both CBD and non-CBD locations, on average the quote for rents in the market for Grade C stock is now in the vicinity of $13 per square metre, while for Grade B offices average rents of about $20 per square metre, according to Mr Hodge. 

Meanwhile, Grade A space is available for rent from $28 per square metre. Average prime office rents in the Phnom Penh market are now $22.40 per square metre.

By the end of 2018 CBRE predicts that the office market will have grown by 136,500 square metres, or 44 percent, from the figure seen today. 

“Grade C offices will make up approximately 52 percent of supply, down from 61 percent currently, and this is because much of the focus from developers has been towards delivering offices of a higher grade, particularly Grade B, which will see its share of supply grow to 32 percent from 27 percent today; Grade A stock will grow from 11 percent to make up 16 percent of the market,” the report said.

“Over the longer term, demand has broadly kept pace with office supply since modern office stock first appeared in the market. However, over the next two years supply will be increasing at a faster pace than previously witnessed, and much of that which is to be delivered will be in a strata-title format,” Mr. Hodge added. 

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