Serviced apartments in Phnom Penh were growing in popularity prior to the global outbreak of COVID-19. Supplied.
Serviced apartment rental quotations slid in Q2 2020, according to CBRE Cambodia. This downward adjustment was seen across the Grade A and B tiers of the market as a result of economic strains caused by COVID-19 and by the entry of new hotel supplies in Phnom Penh.
According to CBRE’s Q2 market report, rental quotations (price per sqm) slide down by 13% and 10% for the Grade A and B segments, respectively, compared to figures in H2 2019. CBRE reports that while many tenants, especially expats, have vacated their rental properties, some agreements of 3 to 6 months have been signed within the recent few months. Though this has not made up for the lost market.
Additionally, the report cited no new serviced apartment projects were opened and launched during Q2 2020. CBRE cites that the current supply of serviced apartments number 2,725 units, most of which are located in the highly commercialized areas of BKK1 (42%) and Daun Penh (24%).
Hotel units are the primary competitor of serviced apartments as residential offerings are comparable to one another. As a result, the entry of new hotel supply is applying additional pressure on the serviced apartments sector on top of the stiffer competition caused by the dwindling tourist/expatriate market.
In June 2020, the government enacted a $3,000 deposit and $50,000 insurance requirement from tourists and businessmen entering the Kingdom. The measure was designed to minimize the risk of infected persons from causing a second outbreak in Cambodia. Both the deposit and insurance requirements were eventually waived in principle by the Cambodian government to help ease the burden on its tourist sector.
The relaxation of entry requirements, coupled with the announced reopening of schools starting in August, is expected to attract expatriate back in the country. Though it is unlikely that a quick recovery will be seen considering that most countries still have travel restrictions in place.