The second quarter of 2022 saw the real estate industry regaining momentum, carried by sustained positive market sentiment, according to real estate consultancy firm JLL Philippines.
In JLL’s real estate market overview for the second quarter, the firm presented trends in the office, retail, residential, and hospitality sectors, as well as an overview of logistics and industrial opportunities in Metro Manila.
Metro Manila Office Overview
“Sustained positive market sentiment carried real estate momentum in the second quarter of 2022,” said Janlo de los Reyes, JLL head of Research and Strategic Consulting.
In Metro Manila, office leasing volumes continue to climb, with a 21.2 percent increase compared to the previous quarter.
Demand in the second quarter of 2022 is diversified, meaning there are different sectors leasing spaces, compared to the IT-BPM-driven first quarter. Non-IT-BPM services account for 45 percent of demand, while IT-BPM and POGO players represent 42.7 percent and 12 percent, respectively.
Office move-outs and rightsizing are still ongoing. Office vacancies continue to stabilize, playing at just around 17.5 percent for the past four quarters, despite the market seeing 54,090 square meters in new supply in the second quarter. The gap between headline and transacted rates continues to narrow, closing in at nine percent in the second quarter of 2022.
Retail, Residential, Hospitality
Move-ins are gradually outpacing move-outs in the retail industry. The food and beverage sector continue to lead both move-ins (22.1 percent) and move-outs (23.6 percent).
“The improving demand and the absence of supply saw vacancy ease,” said de los Reyes.
“Rents are gradually climbing, and lease terms are returning to pre-pandemic arrangements,” he added.
In the residential sector, return-to-office and soft rentals continue to drive leasing demand, as people are moving back from the province to stay in units near their workplaces.
Residential sales continue to move sideways, while prices maintain growth uptick behind flexible terms. In the hospitality sector, occupancy levels decline as demand slows down.
It must be noted that select segments (luxury, economy, and midscale) registered smaller occupancy decline. Room rates are picking up, but the average as of the second quarter of 2022 (P6,100 per room per night) is still far from pre-pandemic rates (P9,100 per room per night in 2019).
The luxury segment continues to lead room rates, averaging P15,390 per room per night in the last quarter, owing to reopening of club rooms and exclusive access areas. Economy rates closed at an average of P2,280 per room per night.
Investing in Logistics
It is timely to invest in the logistics and industrial sector as the global allocation increased, said Charlie McNaught, JLL director for Logistics and Industrial.
“The overwhelmingly strong demand from e-commerce, third party logistics (3PLs) and fast-moving consumer goods (FMCGs) is being met with a critical lack of modern logistics supply, suitable for the occupational needs of these occupiers,” he said.
He also touched on growing sub-sectors such as cold storage and urban logistics.
“Further to this, we are seeing demand from sub-sectors such as cold storage and urban logistics to supplement the backlog of requirements due to increased demand from grocery and next day delivery,” he added. JLL foresees the structural change in the market to continue.
“We think it’s a new trajectory in the logistics sector, especially in Southeast Asia.” McNaught reiterated the benefits of investing in logistics and industrial as a sector: optimizing underutilized land assets, stable long-term income returns, strong occupation backdrop leading to rental growth, diversification, and resilience in a non-certain market.
In all, JLL expects the Metro Manila real estate market to see continued gradual market recovery, and sustained momentum in the third quarter, owing to increasing return-to-office (RTO) by occupiers.