Phnom Penh contemplates retail space glut as pandemic persists
The capital city is facing a surge in vacant retail space, a figure that has been expanding over time but with the onslaught of food delivery apps and e-commerce, and the ongoing risk of Covid-19, how will it all pan out?
AWHILE ago, businesses started to disappear from WB Arena, a sprawling $10 million riverside development in the capital’s Chak Angre dust swirling commune as the effects of the Covid-19 pandemic dug into people’s pockets.
Built by logistics tycoon Sear Rithy’s development arm Worldbridge Group (hence the WB acronym), the project had Singapore’s famous Clarke Quay in mind when draft plans were drawn up, with the hope of evoking that quayside feel.
The commune, although 3km away from the commercial business district linked by Norodom Boulevard, a thoroughfare flanked by Phnom Penh’s classy old real estate, is an antonym to that upmarket ambience.
Travelling on that road, the 6,000 square metre-leasable space hub including a 400-seat theatre, fronting the scenic Tonle Bassac, breaks the monotony of National Road 2’s ubiquitous mish-mash of a shophouse landscape. The arena was built to provide an all-inclusive entertainment and shopping experience for people in the area without having to go into the city centre.
However, a few short months of its launch in late 2019, businesses came under pressure as footfall waned on the back of an intermittent spike in coronavirus cases.
These days, it languishes with several units, once tenanted by foreign retail chains such as Japanese-owned convenient shop Aeon MaxValu Express and Thai-bred Inthanin restaurant, emptied out while other businesses get by with fewer customers.
Managing director Simon Griffiths of The Mall Company, which oversees a $20 million retail asset portfolio in Cambodia, including WB Arena said occupancy used to be 68 per cent prior to Covid-19.
New tenants were ready to set up shop and a list of marketing activities and events was planned when the pandemic forced a pause on it, dragging occupancy down to 50 per cent.
He said Aeon MaxValu Express’ departure was possibly linked to downsizing efforts. “Their sales target was high even with rental discounts [however] I understand it is not the only store they closed, moved or downsized,” Griffiths told The Post via email.
As for Inthanin, an eatery whollyowned by Bangchak Retail Co Ltd, he believed that the chain’s popularity was low in Cambodia, seeing that only few stores remained after its initial large expansion plan.
Recently though, its Thai-listed parent Bangchak Corp Plc, with 39.04 per cent equity owned by Thailand’s Finance Ministry and two sovereign bodies, noted that 100 additional stores would be established in Cambodia and Laos, a plan that was delayed due to the pandemic.
But the slowdown has been palpable despite discounts. On the whole food and beverage retail front, Griffiths
said discounts of 20 to 70 per cent had been continuously offered depending on the situation and the retailer’s finances as well as the location of the store.
He said given that each store is different, a “blanket” discount policy was not implemented, citing that Starbucks on the street front at Noro Mall would require less discount than a store inside the building, say one located on the second floor.
As the effects of the pandemic eased up in the first two months of this year, discounts were reduced “step-bystep” but things changed again when the third community transmission broke out in the capital.
“For example, Aeon [Mall] is virtually empty at present and [it] is in the central city,” said Griffiths, whose firm also provides retail design consultancy on approximately $40 million worth of retail-focussed developments in the pipeline.
In fact, the firm was ready to sign on Acleda Bank Plc and Volcano Hot, a local soup and barbecue restaurant, at WB Arena, which would have pushed up occupancy to 58 per cent but the tenants decided to hold off until the situation improved.
Dark kitchens and digital apps
The slowing consumption at physical shops is largely a phenomenon of Covid-19 and perhaps to a small extent, a consequence of rising ecommerce and food delivery apps.
Despite the comparatively small population, these foreign and homegrown apps have flooded the market, and even more so during the pandemic.
It is generally symptomatic of high liquidity in the market and healthy disposable income on the back of an expanding middle-income segment.
This is evidenced by a burgeoning broad money, which was about $29.2 billion in 2019, representing 108 per cent of gross domestic product (GDP) that year.
In the meantime, GDP per capita has risen to $1,643 in 2019 from $738 in 2009, according to the World Bank.
For some businesses, particularly food and beverage operators, serving customers via digital platforms helped them sustain in the downturn, as in the case of Park Café Food and Beverage Co Ltd, a locally-bred food chain.
General manager Heng Sengly said sales had dropped about 60 per cent since the latest wave of community transmission but online orders only dipped marginally.
“If things get severe as they did in Italy or China, we would have to close the shops as a last resort and accept orders for delivery and takeout,” he was quoted as saying in The Post last week.
From the outset of the pandemic, dark kitchens have mushroomed in some of the quieter neighbourhoods in the city to cater to late night food orders.
These kitchens with no signboards or exterior lighting are commonly present in converted porches with food delivery riders camped outside awaiting made-to-order meals as the aroma permeates the streets.
Perhaps, a shifting trend to safer dining for the consumer and lower operating costs for the seller, Griffiths, who agreed that it is an interesting concept, was steadfast in his belief that it would not dent the F&B retail sector.
“… with no store, how does one establish a brand, customer loyalty and following?” he asked.
There are “hundreds and hundreds” of stores now on delivery food apps such as Nham 24, Food Panda and Muuve, and it is difficult to be noticed, and to gain credibility and reputation, he said, adding that stores are valuable brand advertisements.
“... opening a dark kitchen without a store, brand or [physical] customers, [still meant that] marketing costs could easily reach the costs of a physical store if you are going to become well-known and generate a sizeable customer base,” he said.
Griffiths acknowledged that times are difficult and people are driven to online food orders but that would not always be the case.
The apps should be used to supplement store sales with stores turning into distribution points.
“It would be more sensible to look at reducing store size with less seating and focussing on a strong digital presence and strategy rather than going dark.
“I would not recommend setting up a dark kitchen as a way to reduce costs as I don’t believe long-term brand loyalty will be achieved or [that] enough awareness is generated to justify even the cheaper costs of a dark kitchen versus a store,” he said.
It is a notion shared by CBM Corp Co Ltd co-founder Kouch Sokly, whose firm has brought in several international F&B chains including Korean bakery brand Tous les Jours.
Recently, the company has been pushing for more onsite delivery services as customer numbers dwindled, weighing upon its revenue.
However, getting on digital food apps, while it helped to keep the brand and business alive, proved to be a costly affair because of steep commissions.
“It can be as low as 10 per cent and as high as 25 per cent. We only [see]