Cambodia’s capital is navigating a precarious real estate landscape in 2025 as macroeconomic pressures, rising trade tensions, and tightening liquidity drive a broad recalibration across property sectors, according to CBRE Cambodia’s newly released Phnom Penh Mid-Year Review 2025.
The report, which offers a cross-sector snapshot of the office, retail, and industrial markets, underscores investor caution amid a confluence of global and domestic headwinds. New U.S. tariffs on Cambodian exports, a downgraded regional growth outlook from the World Bank, and a widening trade deficit are dampening sentiment in Southeast Asia’s once fast-growing frontier market.
“This review reflects a market adjusting to broader economic pressures yet still demonstrating pockets of strength,” said Kinkesa Kim, Managing Director at CBRE Cambodia. “With the right strategies, investors can continue to unlock value in key segments of Phnom Penh’s real estate.”
Office Market Sees Slower Deliveries, ESG Gaps Widen
The city’s office sector remains subdued amid delayed completions and weakening occupancy. Citywide office occupancy slipped to 64% in H1, driven by soft demand and oversupply in lower-tier assets. Grade A properties, however, held stronger at nearly 80% occupancy.
Only 15% of the 229,000 square meters of new net leasable space projected for 2025 was delivered as of June, with just one new strata-title office completed.
Rental rates remained largely flat, fluctuating between a 4.9% decline and a 2.2% uptick across asset classes. ESG shortfalls are beginning to show, with non-compliant buildings facing resistance from multinational tenants due to operational inefficiencies and sustainability concerns. CBRE also flagged risks from cost-cutting on property management, which is increasing long-term maintenance liabilities.
Retail Market Rebalances, Community Malls Target Budget Shoppers
Retail development paused in the first half, with no new project completions–a strategic move to allow the market to digest existing oversupply. Occupancy fell marginally to 58.6%, mostly due to tenant relocation rather than structural weakness.
The focus has shifted to smaller-scale, affordable and mid-tier developments aligned with subdued consumer spending. Rental rates have adjusted downward across formats as landlords compete to drive leasing velocity.
Community malls are repositioning by diversifying their offerings to attract foot traffic from cost-sensitive shoppers. While some retail exits continued, the volume of closures declined compared to H2 2024, signaling tentative stability.
Serviced Apartments See Rent Spike, but Demand Remains Fragile
Phnom Penh’s serviced apartment segment recorded robust rental growth, but CBRE warned that demand recovery remains incomplete. Roughly 600 new units entered the market in H1–driven almost entirely by the opening of the Wyndham Grand Phnom Penh–which accounted for 83% of the city’s full-year pipeline.
Grade A units saw rents rise 12.6% half-on-half, with Grade B units up 7.2%. Year-over-year growth stood at 6.7% and 5.7%, respectively. Prime districts like Daun Penh, BKK, and Chamkarmon continue to dominate supply due to their proximity to international schools, embassies, and commercial hubs.
Industrial Sector Gains Ground, but Tariff Uncertainty Looms
The industrial and logistics sector posted modest wins in H1, bolstered by government approval of two new Special Economic Zones (SEZs) spanning 955 hectares in Kampot and Sihanoukville. The launch of BYD’s new EV plant in Sihanoukville was also hailed as a milestone in Cambodia’s industrial pivot toward higher-value manufacturing.
But clouds are forming. A 36% reciprocal U.S. tariff on Cambodian goods, set to take effect August 1, threatens to stall momentum. Vietnam, by comparison, faces only a 20% tariff, intensifying competitive pressure in the region.
The Cambodian government is reportedly weighing countermeasures, including reducing import tariffs on U.S. goods and expanding incentives for manufacturers. CBRE noted a shift in Cambodia’s import profile in May, with increasing volumes of electrical machinery, medical devices, and auto parts displacing traditional garment-related goods.
Infrastructure Ambitions Meet Logistical Reality
Despite a slew of high-profile infrastructure projects, including the $1.7 billion Funan Techo Canal, Cambodia continues to lag behind regional peers in logistics performance. High transport costs and fragmented supply chains remain a drag on industrial competitiveness.
The canal, once completed, is expected to reduce dependence on Vietnamese ports and open up inland waterway routes. But execution risk remains high, and trade frictions are already denting investor confidence.
Outlook: Sectoral Divergence Ahead
Looking to the second half of 2025, CBRE sees a fragmented outlook across property sectors. The industrial market may enter a holding pattern amid trade policy uncertainty, while the commercial office sector faces further rental pressure as vacancy rises.
The residential sector is likely to maintain momentum in affordable and mid-range offerings, while high-end activity stays muted. Serviced apartment rents are expected to climb further, though a full demand recovery may not materialize this year.
For investors, the report signals a shift from blanket optimism to strategic selectivity, with fundamentals still intact in targeted asset classes–particularly those aligned with affordability, ESG, and long-term infrastructure tailwinds.
English