Leasing and sales markets cool towards the year-end

• Net absorption settled at 19 units in 4Q22, a weaker performance relative to the previous quarter as lessees proceeded with caution amid economic challenges. Minimal improvement on return-to-office rates has contributed to the slower market. Meanwhile, rising inflation has encouraged lessees to prioritise essentials in their budget allocation.
• The sales market continued to see a mixed bag of well-performing developments and assets which recorded a large volume of returned units. However, upscale and luxury developments continued to see positive sales take-up overall, albeit slower than the previous quarter, amid an uptick in interest rates.

Vacancy rate declines marginally

• No new supply was added in 4Q22. New project launches are anticipated to slow down in the near term as developers remain cautious with demand contracting amid economic headwinds.
• Vacancy rate settled at 7.5% in 4Q22, a minute contraction of 2.8 bps q-o-q. The cooling leasing market recorded minimal movement on absorption values, and coupled with a lack of new supply, resulted in an unmoving vacancy rate.

Rents stagnate while prices continue to appreciate

• Residential rents settled at PHP 822 per sqm per month, unmoved from the previous quarter. Unit owners held on to their rents despite the soaring inflation rate, to generate demand amid the lacklustre leasing market.
• Capital values sustained an upward trajectory and settled at PHP 278,563 per sqm, a growth of 0.6% q-o-q. This expansion is weaker compared to the previous quarters, on the back of weaker demand as well as higher interest rates, which tempered price growth.

Outlook: Leasing and sales demand to remain lean in the near term

• Demand for leasing and sales is anticipated to be weak in the first half of 2023 as the market continues to battle economic headwinds that are impacting decision making. A healthier residential leasing market may emerge towards the later half of 2023 with economic indicators projected to start to normalise.
• Rents are expected to remain unchanged in the near term as unit owners hold on to rental prices to spur demand. Capital values, on the other hand, are anticipated to continue growing, but at a slower pace relative to previous quarters, as soaring interest rates affect the sales demand.