APPD Market Report Article

Manila

August 26, 2022

Janlo de los Reyes, Head of Research, Philippines

-1.9%

PHP 816

Decline
Slowing

Net absorption continues to rise as leasing demand picks up

  • Leasing demand maintained its upward trajectory, backed by the developing rate of return-to-office (RTO) by firms, as well as the relaxed international travel restrictions, which brought back employees and expatriate executives to the main business hubs in Metro Manila.
  • Likewise, the sales market further improved with the majority of pre-selling developments recording positive take-up. More robust economic activities, stabilising of the economy due to the elections, and manageable COVID-19 cases have encouraged investors to proceed with their purchases in the quarter.

Vacancy rate maintains downward trajectory amid new supply

  • Anticipated completions in the remainder of 2022, specifically The Proscenium Residences in Makati City and The Albany – Kingsley Tower in Taguig City, were completed, and bumped up stock by 627 units in 2Q22. No additional developments are scheduled for completion in the remaining quarters of the year.
  • Uptick in lease demand from local and expatriate employees resulted in the contraction of vacancy rate which settled at 8.7%, a compression of 72.8 bps q-o-q. The decline in vacancy levels, in spite of the entry of new supply, reinforces the improving level of leasing demand.

Capital values maintain momentum while rents improve

  • Rents recorded an incremental uptick of 0.1% q-o-q, settling at PHP 816 per sqm per month, breaking the consecutive rental decrease observed since 2Q21. The improved performance of rentals, albeit minimal, is attributed to the continuous acceleration of lease demand with more employees looking for dwelling spaces as they return to the workplace.
  • Capital values continued to rise and settled at PHP 274,160 per sqm, an improvement of 0.4% q-o-q. Similarly, the improving sales demand seen in the quarter aided the expansion of selling prices.

Outlook: Higher RTO rate to spur demand and drive vacancy recovery

  • Vacancy rate is anticipated to see sustained contraction for the remaining quarters of the year, backed by a healthier volume of demand coming from employees returning to on-site work as well as absence of additional supply.
  • Likewise, rents and capital values are projected to steadily rise on the back of a better performing lease and sale markets. The rising inflation rate may affect selling prices, particularly for pre-selling developments, especially with the wholesale index for construction materials in Metro Manila rising by 6.6% in March 2022, the highest since 2012.

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

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