APPD Market Report Article

Manila

May 31, 2022

-2.2%

PHP 815

Rents
Falling

Lease and sale markets improve as employees return to work

  • Lease demand further improved, attributed to the take-up by local professionals working in major CBDs. The sustained leasing demand is underpinned by the resumption of RTO conversations. The improved pandemic landscape in the latter half of the quarter, coupled with softer leasing conditions encouraged potential tenants to activate leases.
  • Similarly, the sale market is exhibiting early signs of improvement with newly sold units outpacing returned units in the inventory. Investment activities slowly gained momentum as markets re-opened and more professionals returned to their workplaces by the latter half of the quarter, prompting investors and end-users to resume purchases.

Around 1,640 units from four condominiums completed in 1Q22

  • The completion of four developments bumped up the residential stock by 1,640 units. The newly completed towers are Century Spire, Madison Park West, East Gallery Place, and The Albany Yorkshire Villas. The remainder of the year is set to bring in 627 units from two developments.
  • Vacancy rate further eased by 50 bps q-o-q, ending at 9.4% in 1Q22. The decline was driven by the activation of leases by local professionals ahead of their anticipated return to the office.

Rents contract incrementally, while prices accelerated

  • Rents compressed by 0.4% q-o-q, settling at PHP 815 per sqm per month. Majority of the unit owners brought down rates to attract tenants amid weak leasing conditions. The decline was relatively slower compared to the previous quarter, indicating that rents may have started to bottom out.
  • Capital values, on the other hand, experienced an uptick of 1.3% q-o-q, ending at PHP 273,032 per sqm on the back of improved volume of demand. Select developments have lowered prices, although the majority have increased rates as they take advantage of the recovering demand.

Outlook: Residential demand to recover in tandem with office RTO

  • Vacancy rate may see further improvement in the near- and long-term on the back of more companies gradually implementing RTO with COVID-19 cases projected to continue its downward trend. Rents may also improve incrementally by year-end owing to anticipated demand build up.
  • Likewise, sale activities are anticipated to continue its upward trajectory as more investors and end-users gain renewed confidence and interest in the market, underpinned by the gradually improving COVID-19 situation of the country. Prices are projected to accelerate faster in the long-term in tandem with the boost of sale activities.

Note: Manila Residential refers to the Makati City and Taguig City mid-high and luxury residential market.

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