ECONOMIC INDICATORS BODE WELL FOR FUTURE RETAIL AS NEW SUPPLY IS MET BY DEMAND
June of this year saw the opening of Aeon Mall adding 66,000 Sq.m of space and 173 units to Phnom Penh’s retail sector. Foreign brands and franchises dominate in each category and the mall has Cambodia’s largest food court with 1,200 seats. Opening with a reported zero vacancy rate has been a great success story for Aeon when compared to the market average rate of approximately 22%. This can be attributed to factors such as new market entrants, expansion of existing operators and a lack of quality leasehold management at existing centers constraining returns for owners and occupiers.
Parkson is set to open a retail center in Q4 2015 adding retail space of 36,000 Sq.m mall anchored by department store as part of the 70,000 Sq.m Phnom Penh City Centre development also incorporating a supermarket, multiscreen cinema and IT/Electronics mall. This will continue the transition of Phnom Penh’s retail sector from existing traditional markets towards International quality, purpose built retail centers that in turn will draw more International brands to this developing market.
2014 has seen some of the city’s biggest developments come to fruition with Vattanac Capital and Aeon mall completing in the first half of the year adding a combined 71,000 Sq.m of prime retail space to Phnom Penh’s retail sector. 2015 will see Parkson mall and department store open adding a further 70,000 Sq.m. This will see total retail supply more than double from 105,000 Sq.m in 2012 to more than 300,000 Sq.m by 2016. Q2 2014 also saw the soft launch of Vattanac Capital’s retail offering including international brands such as Hugo Boss, Longchamp, TWG and Rimowa.
Speaking at the opening launch of Aeon mall, Managing Director, Shinobu Washizawa said the mall target customer group was aged 20 – 30 years old; a sign of Cambodia’s young demographic and fledgling middle class with increasing disposable income. Economic indicators are encouraging with GDP growth at 7.2%; one of the fastest rates in the world. With purpose built, International quality retail space now available many foreign brands, including 43 Japanese retailers have opened outlets in Cambodia for the first time. Aeon has seen a much lower vacancy rate than the market average with demand coming from local and international players.
Average rent* across the shopping centers stands at $27.30 per Sq.M ranging from $20 to $32 per Sq.M, the arrival of International operators such as Aeon and Parkson has seen the introduction of modern rental practices such as turnover rents.*(Average market rents calculated on Ground floor & 1st floor basis)
A range of new brands have entered the market for the 1st time including:
F&B: Breadtalk, Kenny Rodgers Roasters, Beard Papa’s, S&P, Pepper Lunch and Lotteria.
Fashion: Giordano, Clarks, H.E. by Mango, Penshoppe, Lowrys Farm, Bonia, Carlo Rino, Flaxus Tokyo and Wacoal.
Other: Toni & Guy, L’Occitane, Rimowa, Daiso Major Cineplex and Future World (Apple).
A number of key car bands are set to establish stand-alone units in Phnom Penh, with BMW arriving last year and Audi and Land Rover set to open units.
over the course of 2014. The Lucky Department Store closed on Monireth, Levi’s relocated to City Mall on the other side of the street, Campore Group opened multibrand Central Mall at Central Market.
Phnom Penh will see major increases in supply of retail space over the next two years with gross floor area for purpose built multi-tenanted retail set to increase by more than150% by the end of 2014 with an additional supply in the pipeline through to 2017 with developments Olympia by OCIC and The Bridge by Oxley under construction with a second Aeon mall now in early stages of discussion. Parkson confirmed 2 additional projects, Lion City and above mentioned The Bridge by Oxley where they will manage the retail component. With established retail developers Aeon, Parkson and Hongkong Land responsible for this new supply the quality of space and management is set to increase prompting an uplift in average rents; competition from these established shopping center operators is likely to weigh further on performance of older centers already witnessing lower occupancy and customer footfall in their centers.
Cambodia has a young population with over 30% under the age of 15 and a further 21% aged 15-24. GDP per capita growth was last recorded at 6.6% and although largely a rural population there is an urbanization rate of 3.25% per annum. This is a demographic picture that bodes well for future retail demand with a youthful workforce, and growing urban population. Incomes are rising fast; albeit from a low base but discretionary income is becoming achievable for many families for the first time. A recent report calculated the Cambodia GNI at $950 per capita; fast approaching the World Bank definition of a middle income-economy at $1,045.
Retail supply is set to grow in coming years but CBRE feel this will be met by demand due to improved quality of retail space, international management and the sectors growth potential. 2014 has seen a number of International brands enter Cambodia for the first time and this is a trend set to continue as the country enjoys improved political stability and, increased local demand.