Metro Manila’s real estate sector continues to face challenges in the third quarter due to the lingering economic impact of the COVID-19 pandemic, property consultancy firm Jones Lang LaSalle (JLL) said Thursday.
In a statement, JLL said the capital region’s office segment faced overall subdued leasing activity due to softening demand, which was shown by average vacancy rates rising to 9.5% during the July to September period “due to occupiers moving out.”
“We have seen entry and expansion plans put on hold. There were lease contract pre-terminations especially in the POGO (Philippine Offshore Gaming Operators) sector, as well as downsizing of offices by BPO (business process outsourcing) firms as they re-evaluate their real estate portfolio,” JLL head of Research and Consultancy Janlo de los Reyes said.
Likewise, overall pre-commitment rate of office spaces fell to 24.4% at the end of third quarter as potential tenants are holding off leasing plans as they continue to assess space requirements in the next normal, according to JLL.
Nevertheless, the property consultancy firm said it still sees a bright spot in the BPO sector continuing to drive demand in the long term, despite the exodus of POGO firms in the country.
“Office demand from POGO firms may still remain despite ongoing tax concerns and reports of exits. We anticipate that operators that will stay are those that are keen to expand their operations in the country and lead to stable office demand moving forward,” said de los Reyes.
For the residential sector, average rental vacancy rose to 8.2% in the third quarter of the year owing to the weak leasing activity.
The City of Manila posted the highest increase as work-from-home set-up and online schooling have affected lease activity from students and professionals, according to JLL.
In terms of sales, trajectory differs for ready-for-occupancy and pre-selling projects.
“Take-up of recently completed projects showed improvement in Q3 due to favorable payment terms and availability,” de los Reyes said.
“Pre-selling market, on the other hand, is facing weaker demand as buyers are more cautious of their long-term spending,” he said.
The retail sector also continued to exhibit weak activity in the third quarter even with the gradual easing of the community quarantine.
Average vacancy rate increased by 6.3% as store closures outpaced store openings during the period.
Around 80% of mall developments originally slated for completion in 2020 slipped to 2021 due to construction schedule challenges posed by the pandemic, JLL said.
Despite these, JLL said it remains optimistic and sees bright spots that will continue to facilitate the growth of Metro Manila's real estate landscape.
One of which is the “hub-and-club model”, where occupiers will maintain a head office (club) for socializations such as client meetings and town halls, and expand through satellite offices (hubs), which may be closer to where employees reside.
"This decentralization strategy is already taking shape now and may redefine the real estate strategy of occupiers moving forward,” de los Reyes said.
JLL said it also anticipates that real estate investment trusts (REITs) will continue to attract investors in the medium to long-term and will allow the country to further develop capital investments.
Likewise, it expects the current trends to continue in the long term such as digitalization as the norm of real estate players; the rise of smart cities and townships; and the emergence of alternative asset classes such as data centers and logistics.—LDF, GMA News