Office space, residential vacancy rates rose in Q3

Vacancy rates in Metro Manila’s real estate sector widened in the third quarter, property consultancy firm JLL Philippines said Thursday. 

The property consultancy firm said Metro Manila’s office segment faced a rising vacancy rate of 9.5 percent in third quarter as many occupants moved out.

“We have seen entry and expansion plans put on hold. There were lease contract pre-terminations especially in the POGO [Philippine offshore gaming operators] sector, as well as downsizing of offices by BPO [business process outsourcing] firms as they re-evaluate their real estate portfolio,” said JLL head of research Janlo de los Reyes.

The overall pre-commitment rate of office spaces also fell to 24.4 percent at the end of the third quarter as potential tenants were holding off leasing plans as they continued to assess space requirements in the next normal.

JLL said, however, the BPO sector would continue to drive demand in the long term, despite the exodus of POGO firms.

“Office demand from POGO firms may still remain despite ongoing tax concerns and reports of exits. We anticipate that operators that will stay are those that are keen to expand their operations in the country and lead to stable office demand moving forward,” De los Reyes said.

JLL said that in the residential sector, the average rental vacancy rose to 8.2 percent in the third quarter amid the weak leasing activity. Manila posted the highest increase as the work-from-home set-up and online schooling affected lease activity from students and professionals.

It said that on terms of sales, trajectory differed for ready-for-occupancy and pre-selling projects. Take-up of recently completed projects showed improvement in the third quarter because of favorable payment terms and availability, while the pre-selling market faced weaker demand as buyers were more cautious of long-term spending. Othel V. Campos

The retail sector also continued to exhibit weak activity in the third quarter even with the gradual easing of the community quarantine. The average vacancy rate increased by 6.3 percent as store closures outpaced store openings from July to September.

Around 80 percent of mall developments originally slated for completion in 2020 slipped to 2021 because of construction schedule challenges posed by the pandemic.

JLL said it remained optimistic that bright spots would continue to facilitate the growth of Metro Manila’s real estate landscape.

It said one bright spot is the “hub-and-club model” where occupiers maintain a head office (club) for socializations such as client meetings and town halls, and expand through satellite offices (hubs), which may be closer to where employees reside.

“This decentralization strategy is already taking shape now and may redefine the real estate strategy of occupiers moving forward,” de los Reyes said.

JLL said real estate investment trusts would aso continue to attract investors in the medium- to long-term and allow the country to further develop capital investments.