APPD Market Report Article

Manila

December 1, 2021

-0.5%

PHP 1,656

Rents
Falling

Positive net absorption recorded after five consecutive quarters.

  • Positive net absorption recorded at 2,900 sqm in 3Q21 backed by modest size store openings, ranging from 60 sqm to 100 sqm. These mainly came from local stores offering services and local and foreign F&B stores such as Barenaked Body Salon in SM Megamall, PLDT and Smart Center and Mo’s Burger both in Glorietta 1 and 2, King Chef in Ayala Malls Bay Area, and Biarritz Café and Bar in Greenbelt 2.
  • IKEA Philippines opened its pop-up store in SM Mall of Asia as a marketing initiative for their grand opening by year-end in Pasay City.

Vacancy slightly improves

  • Vacancy rate slightly decreased by 0.7% q-o-q, supported by some store openings in 3Q21. Nonetheless, store closures from clothing and bags such as Debenhams and Jessica (Shangri-La Plaza Mall), Old Navy (SM Megamall), Girbaud (Trinoma), and Daniel Hechter (Lucky Chinatown) were recorded.
  • No additional retail developments added in 3Q21. Majority of the developments in the supply pipeline are expansions of existing developments such as Ayala Malls Bay Area Phase 2 in Bay City Reclamation; SM Mall of Asia Phase 4 expansion in Pasay City; and Gateway Mall Phase 2 and Ayala Malls Cloverleaf both in Quezon City.

No change in rents recorded in 3Q21

  • Rental rates stood at PHP 1,656 per sqm per month, unchanged q-o-q but down by 0.5% y-o-y. Select mall operators lowered their asking rents in 2021 compared to the asking rents in 2020 to improve their high vacancy rate since 2020.
  • Philippine Senate approved a bill to amend the current foreign investments law to further attract foreign investors. Under the Senate Bill No. 1156, proposed amendments to the current Foreign Investments Act (FIA) of 1991 include allowing foreigners to invest 100% equity in domestic market enterprises and set-up and own 100% of small and medium-sized enterprises, following some exceptions.

Outlook: Mixed retail performance expected to continue

  • Retailer activity is anticipated to remain limited with brands looking at relocating or expanding to new locations while refreshing their stores. Muji Philippines and Zara are set to transfer to a larger space in their current locations which are Central Square and Trinoma, respectively. Other expansions of international brands that are set to open include Birkenstock, Panda Express, and Mango.
  • The weak retailer activity may lead to marginal rental softening, especially in mall developments with prolonged high vacancy.

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

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