APPD Market Report Article

Manila

May 31, 2022

-7.9%

PHP 1,526

Decline
Slowing

Pull-outs evident in the quarter, leading to negative absorption

  • Net absorption reached -7,300 sqm coming from a positive performance in 4Q21. Pull-outs, termination of leases, and lack of new supply led to the negative absorption. General retail, F&B, and footwear brands led the majority of the pull-outs recorded in the quarter, accounting for 21.6%, 18.1% and 16.2%, respectively, of total pull-outs in 1Q22.
  • New leases recorded in the quarter are likewise led by the general retail and F&B segments, comprising 26.3% and 23.2%, respectively, of the total retail move-ins in 1Q22. Brands with notable take-up in the quarter include Healthy Options, Miniso, Frankie’s New York Buffalo Wings, and Greyhound Café, among others.

Vacancy inches up minimally

  • The vacancy rate experienced an incremental uptick of 12 bps q-o-q to 6.2% in 1Q22. Some tenants have rationalised spaces as they faced uncertainties with the Omicron variant during the early parts of the quarter, while some leases have expired. Nevertheless, notable new leases buoyed vacancy levels, resulting in minimal movement.
  • No new retail stock was recorded in 1Q22 as developments originally scheduled to open this quarter, such as One Ayala and Ayala Malls Arca South, slipped further to the latter parts of the year. Roughly 403,000 sqm of retail space coming from five developments is expected to go online by end-2022, potentially propelling vacancy rates upwards.

Rents hold steady

  • Retail rents remained stable, settling at PHP 1,526 per sqm per month. The stable rents coupled with the still flexible lease terms remain as operators’ attempt to keep afloat amidst fluid demand.
  • Capital values ended at PHP 220,145 per sqm, recording a minimal uptick of 0.8% q-o-q, as the sector gears up in anticipation of the foreseen improved investment market with the finalisation and implementation of the Retail Trade and Liberalization Act.

Outlook: Uptick in retailer activities anticipated as restrictions relax

  • Transactions are anticipated to accelerate in the near and long term as restrictions relax and foot traffic in malls return. Key legislation, such as the amendments in the Retail Trade Liberalization Act, are seen to further spur activities in the sector. Demand is projected to be led by the F&B sector, while local brands make up the majority of the expected new entrants.
  • Rents are anticipated to rebound and gradually register positive movements in the medium to long term in tandem with the projected improvement of leasing demand. Flexibility in lease terms is still anticipated in the next three months as the market regains momentum.

Note: Manila Retail refers to metro Manila's overall prime retail market.

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