APPD Market Report Article
ManilaSeptember 4, 2023
Janlo Delosreyes, Head of Research, Philippines
Leasing demand remains stable, led by the e-commerce industry
- Logistics net absorption sustained its positive trajectory and settled at 6,100 sqm in 2Q23. This is largely due to an e-commerce company which took up roughly 32,900 sqm in a brand new logistics facility in Laguna. No take-up was recorded for the majority of the developments as most remain fully occupied.
- On the other hand, vacated spaces were also seen in the quarter, including a third-party logistics player which released roughly 17,000 sqm of warehouse space in Laguna, as well as several cold storage operators which vacated spaces in Laguna, Cavite and Batangas.
A warehouse completion in Laguna adds 32,900 sqm to the market
- The completion of the first warehouse in the second phase of RLX Calamba in Laguna introduced around 32,900 sqm of warehouse space in the market. The remaining quarters of the year are slated to welcome roughly 176,700 sqm of warehouse space to the market, the majority of which are already pre-leased.
- The multiple vacated spaces recorded in the quarter drove the uptick of vacancy levels to 2.9% in 2Q23, climbing by 135.3 bps h-o-h. The volume of new supply scheduled to enter the market in the latter half of the year is anticipated to weigh on the recovery of vacancy levels.
Rents and prices almost unmoved
- Average logistics gross rents remained almost unmoved and settled at PHP 323.8 per sqm per month, a minute contraction of 0.3% h-o-h. The majority of the facilities retained their rents, while the newly-completed development commanded rents below market average, pulling down the overall average.
- Capital values were unmoved and recorded PHP 44,500 per sqm as investment activities in the industrial and logistics space remained lean in the quarter. Similar to other sectors, elevated interest rates have dampened investor sentiments in the industrial and logistics space.
Outlook: New supply may bring up vacancy, but keep rents stable
- The large volume of new warehouses slated to enter the market towards the year-end is anticipated to bump up vacancy incrementally. Nonetheless, leasing volumes are expected to remain stable and potentially minimise vacancy expansion, especially with the majority of the upcoming supply already pre-leased.
- Rents for the majority of the assets are expected to remain unmoved by year-end as vacancy rises. Meanwhile, the completions of new, prime warehouses are expected to bump up the market average incrementally. Healthier rental growth may be seen in 2024, coinciding with the projected contraction of vacancy levels due to limited supply.