The Metro Manila property market exhibited a mixed performance in the third quarter of 2024, as revealed in Jones Lang LaSalle (JLL) Philippines’ latest market overview. The report highlights varied outcomes across the office, retail, and hospitality sectors, with holiday-driven optimism boosting retail and hospitality while office leasing remains under pressure.
Office leasing holds steady amid supply challenges
The office leasing sector showed stable demand, with a year-on-year increase of 31.2% in leasing activity. Corporate tenants, spearheaded by a government agency, accounted for 54.4% of the demand. While business process outsourcing (BPO) firms had a smaller share this quarter, their upcoming expansions are expected to invigorate the sector in the months ahead.
Despite reduced vacancies, now at 19%, the total released space increased by 6.5% year-on-year. A surge in new office supply with low pre-commitment levels is projected to push vacancy rates to 20% in the medium term, sustaining a downward trend in rental rates, which have dropped to Php 970 per square meter per month.
“Leasing conditions, particularly vacancies and rentals, are largely influenced by supply pressure and firms rationalizing their office spaces based on downsizing or expansion strategies,” said Janlo delos Reyes, Head of Research and Strategic Consulting at JLL Philippines. He also noted that hybrid work arrangements are likely to persist into the next year.
Retail sector gears up for holiday surge
As the holidays approach, the retail sector is poised for a strong performance. The third quarter saw steady growth in store openings, with food and beverage leading as the most active retail category, accounting for 27.6% of new openings and 26.1% of closures.
Although the addition of new malls nudged vacancy rates to 6.9%, these are expected to decline to 6.5% by year-end, driven by expansions from both local and foreign brands and an anticipated slowdown in new retail supply.
Hospitality sector shows sustained rebound
The hospitality sector continues to shine, buoyed by strong tourism numbers. Hotel occupancy rates reached 76.9% in the third quarter, supported by 4.4 million international tourist arrivals as of September 2024—a 9.9% year-on-year increase.
Room rates also saw positive growth, with average rates rising to Php 7,971 per night—a 2.2% increase quarter-on-quarter and a 3.8% jump year-on-year. By year-end, average rates are expected to exceed Php 8,000 per night as demand remains robust during the peak travel season.
Supply pressure remains a key consideration
Looking ahead, Metro Manila faces significant supply pressure across all sectors, with 1.1 million square meters of office space, 283,000 square meters of retail space, and 3,900 new hotel rooms set to enter the market by 2028.
“Metro Manila’s real estate performance is largely driven by space rationalization strategies and supply pressure. It’s essential to monitor these key indicators over time as they inform developers and decision-makers about how to strategize amid leasing conditions in the coming months,” added delos Reyes.
The interplay of demand, supply, and strategic adjustments continues to shape the Metro Manila real estate market, setting the stage for evolving trends in the quarters ahead.
