APPD Market Report Article

Manila

December 1, 2021

0.1%

PHP 827.6

Rents
Falling

Leasing demand from expatriates declines in 3Q21

  • Leasing transactions decreased in 3Q21 as expatriates terminated their contracts due to the pandemic. The prolonged WFH set-up, travel bans, health risks, and slow business expansions put a damper on leasing demand from expatriate employees.
  • Despite fewer sales transactions, enquiries remained high from local buyers seeking opportunities as they take advantage of favourable loan terms.

Two residential developments complete in 3Q21

  • Two residential developments completed in 3Q21, adding about 1,118 units to the total existing stock. These are The Garden Towers- Tower 2 in Makati City and Uptown Parksuites Tower 2 in BGC. No additional residential developments anticipated to complete in 4Q21 as one residential project completed ahead of schedule and two developments pushed back completions to 1H22.
  • The vacancy rate increased to 10.6% in 3Q21, up by 86 bps q-o-q, from 9.7% in 2Q21, due to the slow leasing activity. WFH arrangements and travel policies have been impacting the leasing decisions of existing and prospective expatriates to either relocate back to their home country or defer their transfers.

Rents and capital values record minimal decreases in 3Q21

  • Rents in 3Q21 decreased by 0.5% q-o-q to PHP 828 per sqm per month. Landlords lowered rents due to the weak leasing demand from expatriate employees and are now open to offer shorter lease terms to fill in vacant units.
  • Similar to the leasing market, capital values for the residential market slightly decreased by 0.2% q-o-q. As per the Philippine Central Bank, the residential real estate price index (RREPI) for condominium developments decreased by 14.3% y-o-y, brought about by the uncertainties associated with COVID-19.

Outlook: Sales market to show resilience while leasing demand to lag

  • Slow lease demand from expatriates and corporates may be expected in the short to medium term, owing to the anticipated continued WFH arrangements and travel restrictions, which would further impact leasing negotiations and decisions.
  • The sales market may see improved activity in the near term on the back of stable local investor interest combined with favourable loan and payment terms offered by banks and developers, respectively.

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

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