A simmering border conflict with Thailand is having adverse impacts on Cambodia’s property market across multiple sectors, according to a recent report.

The effects are rippling across most property segments in Phnom Penh, notably the industrial sector, finds the Cambodia Real Estate Highlights H1 2025 report, published in August by Knight Frank ( Cambodia ), the local unit of London-based real estate consultancy, which examines market trends in the country.

The border dispute – which included five days of heavy fighting before a ceasefire in late July – along with Trump tariff uncertainty, the review notes, has “significantly” affected the country’s real estate market.

“The dispute between Cambodia and Thailand has disrupted crucial overland trade routes, resulting in logistical bottlenecks and heightened uncertainty,” the report explains. “This situation requires the sector to diversify trade corridors quickly, improve port and warehouse capacity and adapt to changing regional dynamics.” In the longer term, however, it adds: “Prospects for the sector remain bullish”.

Meanwhile, on the US tariff front, the dark skies have brightened somewhat. “Cambodia will avoid a potential tariff increase of up to 49% from the United States after successfully negotiating countervailing duties,” the report notes. “Cambodia’s rate is now 19%, one of the lowest in the region, which bodes well for the manufacturing and logistics sector.”

As for hotel properties, the conflict “quickly dampened” positive market momentum from the second half of last year continuing into the first half of this year.

"While international arrivals recorded positive growth during the first five months of 2025, the closure of the Cambodia-Thailand border and ongoing tensions will weigh down on the sector during the second half of the year,” the report shares. “The core markets of Phnom Penh and Siem Reap continue to face challenges with occupancy.”

Longer-term positives – connections, diversification

Going forward, a new airport serving Phnom Penh – set to open in September – and an existing new airport in Siem Reap “are poised to become key aviation hubs, offering convenient flight connections that will bolster the nation’s tourism and hotel sectors, including those in Siem Reap, by sourcing high-value tourist arrivals.”

The longer-term outlook for serviced apartments, according to Knight Frank, is also positive. “While there will be short-term volatility given the ongoing Cambodia-Thailand border tensions, looking ahead, the serviced apartment sector is expected to thrive as Cambodia continues to develop its infrastructure and urban areas.

“The government’s focus on economic diversification will likely lead to a sustained influx of international businesses and tourists, further fuelling demand for flexible living spaces,” the report explains. “As the economy continues to evolve, serviced apartments will increasingly cater to professionals seeking long-term stays and modern amenities, enhancing their appeal.”

Short-term challenges

In the condominium market, largely dominated by foreigners, “short-term external volatility is expected to weigh down on the market during the second half of 2025”.

And for landed housing – where purchases are restricted to Cambodian citizens – “the short and medium-term outlook for the housing market remains challenging, with an overhang of overpriced properties that developers will struggle to sell.”

In the retail property sector, “supply in the development pipeline is expected to be delayed further, given the current market, which should see occupancy rates rise over the short term. The influx of new retail space in Phnom Penh is expected to moderate over the short term as developers opt to defer completion of new retail malls.”

At the same time, the report notes, the border conflict “directly impacts Cambodia’s retail sector”. Indeed, a consumer boycott of Thai businesses has left petrol stations owned by Thailand’s PTT Public increasingly deserted – at least in Phnom Penh.

In addition, PTT-owned Cafe Amazon outlets are largely empty, and boycotts are also affecting the Thai franchise of 7-Eleven convenience stores, controlled by Charoen Pokhpand Group ( which is ultimately owned by Seven & I Holdings in Japan ).    

While the longer-term outlook “remains positive” for the port city of Sihanoukville – located 200 kilometres southwest of the capital and home to a major special economic zone that’s part of China’s Belt and Road Initiative – “the ongoing border tensions with Thailand in contested areas of Cambodia, as well as the Trump administration’s tariffs imposed on the Kingdom, have created short-term volatility for investors, delaying decisions and impacting economic confidence.”

Infra opportunities, Sihanoukville optimism

“Despite concerns over the border dispute, Phnom Penh’s upcoming airport and government efforts to attract FDI [foreign direct investment] have enhanced its appeal as an investment destination,” the report explains. “Improved infrastructure could mitigate some risks, creating a more resilient commercial environment.”

Better infrastructure would let businesses adapt to changing circumstances and help position Sihanoukville as a logistics hub, the review details, driving demand for office and retail space over the longer term. “The arrival of international hotel brands and recent developments in Sihanoukville signal a recovery in the hospitality sector,” it adds. “However, international tourist arrivals still fall short of 2019 levels, underscoring the ongoing challenges faced by the industry.

“The long-term outlook for the sector remains cautiously optimistic as the Royal Government of Cambodia addresses these challenges and continues to develop infrastructure to improve connectivity to the [Preah Sihanouk] province.”

China and Japan have been major contributors to Sihanoukville’s infrastructure development in recent years with Chinese investment focused on the economic zone and a new expressway to Phnom Penh, the country’s first.

Japanese investment has meanwhile centred on expanding the deepwater port operated by Sihanoukville Autonomous Port, a mostly state-owned enterprise affiliated with Japanese logistics groups Kamigumi and Kobe-Osaka International Port Corp.

Tensions remain

Both Cambodia and Thailand have accused each other of violating a ceasefire brokered by Malaysia on July 28 – with the United States as co-organizer and China as observer.

Thailand’s capture of 20 Cambodian soldiers hours after the ceasefire went into effect remains one of the most pressing humanitarian issues.

Although Thailand has released two of the hostages, the remaining 18 soldiers were still being detained as of August 28.