Landlords face a wave of rent reductions and lease terminations in Phnom Penh

Landlords face a wave of rent reductions and lease terminations in Phnom Penh

Many shophouses have signs looking for new tenants, as the commercial real estate market in Phnom Penh feels the brunt of COVID-19 which has brought a sharp decline in investment volumes and rental prices.

Shophouses in Cambodia are usually 2-3 storey buildings together with ground floor spaces, usually rented out by dental clinics, offices, travel agencies or other business occupants etc as a commercial space. During the past few months, the market has witnessed an increased number of shophouses stand vacant with ‘for rent’ signs and landlords’ contact information.

Landlords are facing a wave of rent cuts and termination of tenancies. Many owners have reduced their rents, but the number of tenants willing to rent remains low.

In addition, the current COVID-19 pandemic has also forced many dining, fashion and other businesses in the service sector, particularly businesses serving foreign tourists to close down due to falls in sales. Some potential tenants were even looking for places with rental discounts of up to 40% from last year, with shorter leasing tenures.

Many businesses have also postponed their openings at new locations until the situation improves. It has also kept investors on the sidelines as to whether to invest or expand their businesses.

Small and medium enterprises – the major sources of tenants in the shophouse rental market, have all scaled-down and terminated their contracts early as a result of the impacts from COVID-19. The current trend of rising vacant commercial properties is likely to last until the end of the year when business activities are poised to rebound, as economies further reopen.

In the end, landlords should maintain their rental concessions such as rent discounts, or rent deferment until the overall situation improves, as there are still significant uncertainties about growth and the shape of recovery amid the COVID-19 pandemic.

Reference source:Construction Property

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