The country’s real estate market is expected to move with cautious optimism this year following the performance in leasing activities in 2021. While the market sentiment has been improving, outlook remains mixed.
A new supply or significant supply expansion is also expected this year in office, retail, hospitality and residential properties which will all have a significant effect on real estate market performance.
A leading professional services firm that specializes in real estate and investment management and has been operating in the Philippines since 1997, JLL covers notable trends in 2021, shares their forward views on the real estate landscape in 2022 as well as highlights sectors that will define the real estate landscape in 2022.
Office market
In the first half of 2022, JLL expects the office market to stabilize but might experience subdued leasing activity in the first half of the year.
For the 4th quarter of 2021, there was a moderate take-up of 75,713 square meters in gross leasing volumes.
While the number is lower than the previous quarters, there is still improved sentiment in the market, with compliance concerns, rightsizing, and halt in vacancy uptick as key factors for the 4th quarter figures.
In terms of elections, JLL sees that leasing activities may slow down in the first half of 2022 as more investors and occupiers postpone their leasing decisions as they wait and see where policies might change.
The IT-BPM (Information Technology and Business Process Management) industry remains a key driver (62.5 percent take-up in 2021 compared to corporate occupiers with 36.6 percent take-up), specifically those that cater to the healthcare, financial services, and e-commerce and engineering domains.
Office move-outs and rightsizing also slowed down in the 4th quarter and occupiers have settled their short-term position and not considering long-term commitments. As it stands, companies are still evaluating what the future office spaces would look like.
However, one thing remains certain according to JLL: There’s more acceptance of a hybrid work model across occupiers. This means they are open to having a percentage of their workforce work remoted.
Retail
The retail sector is expected to sustain positive performance carrying over from the 3rd quarter of 2021. More stores have opened as they took advantage of the holiday season.
Store openings have outpaced closures, with a huge chunk of that coming from IKEA opening 65,000 square meters of retail space. However, there are still some closures, around 10,000 square meters but more than half of that are relocations and renovations as retailers refresh their stores and prepare for expansion.
The top retail categories that are driving store expansions are food and beverage (26.6 percent), followed by home appliances and furniture (21.5 percent). Other retail categories driving expansion include beauty and wellness (13.9 percent), clothing and apparel (10.1 percent) sports and fitness (5.1 percent) with both foreign and local brands expanding their presence in Metro Manila.
Rentals are also declining, and this has helped prop up mall occupancy. Flexible terms are continuing with mall operators continuing to provide discounts in rental for occupiers.
Residential
A significant easing of the vacancy rate in residential condominiums (from 6.8 percent to 5.1 percent) was noted due to the relaxed restrictions and higher return to office in the 4th quarter.
The return to office has led to the increase in demand from professionals working in the business hubs, who may have reactivated their leases or are looking for accommodation near their workplace.
In terms of vacancy levels, the midscale segment improved with rent inching up to P770 per square meter while upscale and luxury registered higher vacancy with rent around P1,029 per square meter.
Overall prices registered mixed performance with increasing prices for ready for occupancy (RFO) properties in the midscale and luxury segments, decreasing price for preselling midscale and an increase for pre-selling luxury.
Hospitality
The holiday season drove up hotel occupancy to 87.9 percent in the 4th quarter due to lower COVID-19 cases, relaxed restrictions, and pent-up leisure demand. This is the highest rate of hotel occupancy during the pandemic.
In terms of facility types, quarantine facilities continue to lead the way at 92.8%, followed by multi-use hotels (servicing quarantine and non-quarantine guests) at 85.6%, and leisure hotels at 79.4%.
There is also a significant increase of operating facilities in the mid-scale segment as multiple hotels took advantage of the holiday season and the demand of staycations.
Overall room rates continued to increase, with the 4th quarter showing a six percent quarter on quarter. Higher room rates were also seen across segments (midscale, upper, and luxury), except for the economy segment, which has a competitive market in terms of demands for discounts in room rates.
For further information, visit jll.com.ph or email ph.enquiries@ap.jll.com.