Office space vacancy rate may widen further from 5.2 percent in the third quarter to a range of 5.5 percent to 6 percent in the fourth quarter, property advisory firm JLL Philippines said Wednesday.
JLL head of research and consulting Janlo de los Reyes said the uptick in vacancy was due to the new supplies coming in, the effect of continued work-from-home set-up and the exodus of Philippine offshore gaming operators.
“Vacancy will remain elevated, but will not significantly increase if the POGO market exits the office market for the Philippines,” de los Reyes said in a presentation.
He said JLL sees the continuing WFH policy would also not significantly affect office vacancy after that IT-business process management companies were allowed to transfer their registration from the Philippine Economic Zone Authority to the Board of Investment.
De los Reyes said rentals might gradually increase, but not at the same level at the height of POGO take-up.
Rentals had leveled off, given the weakening of leasing volumes but may start to climb gradually by 2023 and 2024, he said.
He said that since the outset of the pandemic, landlords had pushed the threshold for cheap rentals.
Move-outs in the retail market are at around 5,500 square meters, while move-ins are at 5,100 sq. m. because of late openings by retailers as they prepare for the holiday season.
Many retailers positioned their openings in the fourth quarter in time for the holiday season to capitalize on the traditional surge in holiday demand, he said.
De los Reyes said a gradual recovery in retail rents, which hovers at P1,600 per sq. m. a month, went up by 1.9 percent quarter-on-quarter, but were still lower by 5.5 percent compared to the same period last year.
The residential market showed a slight weakening of leasing demand with the increase in vacancy for both midscale and upscale and luxury segments.
JLL said the real estate market could face headwinds including inflation rate, interest rate and exchange rates.
“For the real estate market, this means a higher cost of investment for developers. And this means the market may slow down as launches may be spaced farther in between,” De Los Reyes said.
He said boutique developers might be hard-pressed to launch new projects as they have smaller or lower financial flexibility.
The firm also sees slower spending amid high inflation, and this may impact the retail and hospitality markets.