The Philippines’s real estate market is expected to move with cautious optimism in 2022, as mixed outlook pervades some of the domains of the market despite an improvement in market sentiment and leasing performance, a real estate consultancy said Tuesday.
“We also expect new supply or significant supply expansion in 2022 on office, retail, hospitality and residential to exert pressure in terms of real estate market performance,” said JLL Philippines head of research and consultancy Janlo de los Reyes.
JLL said while the office market performance was stabilizing, it could experience subdued leasing activity in the first half of 2022.
“For the office market, we’re seeing signs of market stability. For Q4 2021, what we saw was a moderate take-up of 75,713 square meters in gross leasing volumes. While the number is lower than previous quarters, there is still improved sentiment in the market,” de los Reyes said, citing compliance concerns, rightsizing and halt in vacancy uptick as key factors for the fourth-quarter figures.
“In terms of elections, we see that leasing activities may slow down in the first half of 2022 as more investors and occupiers postpone their leasing decisions as they wait and see where policies might change,” he said.
The information technology-business process management industry remains a key driver of the market with 62.5 percent take-up of 2021, compared to corporate occupiers with 36.6-percent take up, specifically those that cater to the healthcare, financial services, e-commerce and engineering industries.
De los Reyes said the rental market was firming up, with the gap between headline and transacted rents narrowing from 19.9 percent in the third quarter to 4 percent in the fourth quarter.
The retail sector is also expected to sustain positive performance, with sustained easing of vacancy levels across Metro Manila with retail store openings taking advantage of the holiday season.
“Store openings have outpaced closures, with a huge chunk of that coming from IKEA opening around 65,000 sqm of retail space. There are still some store closures, around 10,000 sqm, but more than half of that are relocations and renovations as retailers refresh their stores and prepare for expansion,” de los Reyes said.
Expansions drive store openings, and the top retail categories driving store expansions are food and beverage at 26.6 percent, followed by home appliances and furniture at 21.5 percent. Other retail categories driving expansions include beauty and wellness, 13.9 percent; clothing and apparel, 10.1 percent; and, sports and fitness, 5.1 percent, with both foreign and local brands expanding their presence in Metro Manila.
Retail rentals are declining which helped prop up mall occupancy. Flexible lease terms are continuing, with mall operators providing discounts in rentals for occupiers as opportunities in e-commerce drove sellers/merchants to pivot to the virtual platform.
JLL said there was a significant easing of vacancy rate in residential condominiums from 6.8 percent in the third quarter to 5.1 percent in the fourth quarter because of relaxed restrictions and higher return to office.
“Return to office has led to the increase in demand from professionals working in the business hubs, who may have reactivated their leases or are looking for accommodation near their workplace,” said de los Reyes.
The midscale segment improved with rent inching up to P770 per sqm, while upscale and luxury registered higher vacancy with rent at around P1,029 per sqm.
Overall prices registered mixed performance, with increasing prices for ready-for-occupancy properties in the midscale and luxury segments, decreasing price for pre-selling midscale and an increase for pre-selling luxury.