Rentals declined as the vacancy rates in Metro Manila’s shopping malls, office buildings and residential condominium rose in the first quarter, a real estate consultancy firm said Friday.
JLL Philippines said in its first-quarter report shopping mall vacancy increased to 6.6 percent in the first quarter, triggered by store closures and pullouts by food and beverage and fashion brands.
JLL head of research and consultancy Janlo de los Reyes said office vacancy also hit 14.7 percent in the first quarter, with largest move-outs from Philippine offshore gaming operators and outsourcing and offshoring companies.
“For the retail market, we haven’t seen again any new condition similar to office, and currently the pipeline is limited to around 554,000 square meters in the next three years. This is a trend that we’re seeing in the last couple of years when the pipeline for the retail market has been thin. Majority of the supply is coming from more expansions, with an exception of a new development in Quezon City by Ayala Land,” de los Reyes said in a briefing.
Shopping mall supply remained at 656,400 sq. m. which may be carried over to the second half of 2021. Office supply stood at 9.8 million sq. m., with projected or incoming supply deferred to the second semester.
Store net closures in the first quarter exceeded 22,000 sq. m., coming mostly from a mix of local and foreign which accounted for 38.5 percent; F&B, 23.5 percent; and footwear brands, 10.7 percent.
Net openings lagged behind at 11,800 sq. m., with F&B representing 18.6 percent; general merchandise, 15.9 percent; and sports and fitness brands, 12.6 percent.
“This office figure was higher quarter-on-quarter and in terms of the year-on-year. We’re also seeing a lot of projects that have no completion dates yet, and this will impact supply pipeline in the next couple of years. Despite this lack of new supply in the market, vacancy continued to climb in the first quarter to 14.7 percent,” de los Reyes said.
The surge in vacancies is seen to sustain the downward trend in rents. Retail rents fell 16.4 percent to P1,730 per sqm per month from a year ago.
Meanwhile, office rents decreased 3 percent to P1.120 per sq. m. a month in the first quarter.
De los Reyes said occupiers continued to focus on cost optimization and put their real estate decisions regarding entry and expansion.
“So a lot of the demand that we’re seeing now are mainly renewals coming from the O&O firms, and this is to reposition their portfolio,” he said.
Vacancy in the residential market also rose to 7.3 percent in the first quarter, as lease demand slowed down, specifically in March. JLL said landlords adapted to the demand decline by discounting rents to minimize vacancies.
Ready-for-occupancy and pre-selling sales recorded negatives net sales in the first quarter at 672 units and 8 units, respectively.