AEON Mall, the first large-scale modern shopping mall in Cambodia, recently celebrated its third year of operation in the Kingdom, but with several new high-end malls slated to open over the next few years, analysts expect more competition and sweeping changes in the country’s retail landscape.

Phnom Penh can expect a rapid growth of retail supply as Japanese group Aeon is expanding its presence in the Kingdom with a second location, Aeon 2, announced for 2018 with 70,500 square metres of retail space.

Separately, Exchange Square Mall recently opened its doors, offering 13,000 square metres of leasable retail space, while Parkson Mall, after several delays, is set to open later this year with 36,000 square metres of retail space.

Daniel Li, CEO of Cambo-Sia, which operates two separate locations in Aeon Mall with Sanrio Gift Gate, a retail store for Japanese characters such as Hello Kitty, and its Advanced Learning Academy, which runs after-school educational programmes, said he has seen the retail market go through significant changes in the past three years. Aeon Mall in particular has helped shape the standards for subsequent retail spaces in Cambodia, he noted.

“Aeon is the first international mall operator and developer in Phnom Penh, and they have set an industry standard and expectations for other such malls in Cambodia,” he said. “The demand for entry into Aeon is very high, and there is a waiting list for brands wanting to make a debut in the mall.”

Li said he’s seen steady sales growth for his business in Aeon Mall, noting that consumers are increasingly looking to purchase goods from high-quality international brands, leading to increased demand for retail leasing space in the capital.

“Consumers are benefiting from the range of products and services offered under one roof and this is a strong indicator of consumer confidence,” he said. “The industry is also seeing a growth in the number of new brands entering the market with more franchise and licensed brands.”

Aeon Mall’s leasing department did not respond to repeated requests for information, however a casual inspection of the mall revealed both significantly higher tenancy and more turnover than when the mall opened in 2014.

To replicate the success of Aeon Mall, with its 66,000 square metres of retail space, other locations will need to focus on providing a good shopping experience by hosting a variety of brands while also supporting retailers with a strong management team, Li said. Each new mall will need to carve out its own niche, he explained, adding that he foresees little growth in the high-end retail segment as it is out of reach for most Cambodian consumers.

“Retailing in Cambodia will always be a challenge in the mid- to high-end sectors. This is largely due to high import tariff,” he said. “Consumers in this range will usually travel to regional

cities such as Hong Kong, Singapore, Malaysia and Bangkok, where there are tax rebates for tourists.”

James Hodge, associate director of CBRE Cambodia, said the retail sector in Cambodia should expect to see a further evolution over the next three years, as the total modern retail space catapults from the current 212,000 square metres to 582,000 square metres by 2019. This shift represents the first major readjustment of the Kingdom’s retail space supply, which has not grown much since Aeon Mall opened in 2014, he said.

“The country’s economy has continued to grow at a significant pace and the middle class has become increasingly established,” he said. “This has created pent-up demand for retail space from a number of retailers, particularly those in the food and beverage and entertainment sectors, which continue to prove increasingly popular with local people and expatriates alike.”

New retail developments are showing signs of adaptation to the population’s evolving shopping habits, which are mostly shaped by Cambodia’s young and urban middle class, Hodge added.

According to CBRE’s first-quarter 2017 real estate report, prime retail rents for malls have decreased by 0.9 percent compared to the previous quarter, reaching an average of $31.1 per square metre per month, though prices increased by 1 percent year on year.

Knight Frank’s latest Cambodia report for the second half of 2016 gave similar results, showing that prime rental prices ranged from $32 to $70 per square metre per month, with the high-end Vattanac Capital mall offering the highest leasing prices in the Kingdom for its 5,000 square metres of retail space.

“Supply risks outpacing demand in the short term, with current demand matching available supply,” the report said. “Whilst the overall average occupancy rate remains high, there’s a risk that supply will outpace demand for purpose-built retail space in the short term, with nine projects expected to come on stream in the next three years.”