Absorption remains positive as store openings in new malls rise

• Net absorption rose by 12,858 sqm in Q2 2024, due to a continuous rise in store openings in newly opened malls in Makati City, Paranaque City and Quezon City in 2023. F&B still accounted for the most store openings in Q2 2024 at 23.2%.
• Mesa in Makati City and Choi Garden in Quezon City were the most notable F&B openings in Q2 2024. Meanwhile, store closures soared by 53.1% q-o-q in Q2. F&B accounted for 32.0% of the closures, followed by clothing apparel (12.0%).

Around 26,300 sqm of new supply comes on stream in Q2 2024

• The third level of Mitsukoshi Mall in Taguig City and Gateway Mall 2 (Phase 2) in Quezon City opened in Q2 2024, adding about 6,300 sqm and 20,000 sqm of retail space, respectively. The opening of Opus Mall in Quezon City was moved to Q3 2024.
• The closure of Greenbelt 1 in Makati City removed around 28,000 sqm of retail space from the existing stock. Meanwhile, the vacancy rate fell by 23.8 bps to 7.2% in Q2 2024, owing to an increase in store openings from newly opened malls in 2023.

Rents remain stable to sustain demand

• Average retail rents remained at PHP 1,705 per sqm, per month, as operators maintained rents to sustain demand and attract new tenants.
• Capital values rose 0.9% to PHP 230,293 per sqm, as the retail market remained stable. Prices may rise in the subsequent quarters as the central bank could cut rates in H2 2024 with inflation remaining controllable, thus stimulating investments.

Outlook: High demand in the holiday season bolsters retail activity

• Higher lease volumes are expected in the second half of the year, driven by the peak holiday season and a substantial volume of new supply set to open with new stores. Upcoming stores are seen to keep leasing activity strong for the rest of the year.
• Rents are expected to rise by year-end, along with increased leasing activity. Developers are also committed to improving the consumer shopping experience by renovating some of their malls, which may raise the value of retail space in the future.