Property market seeing a rebound in 2022
The local office and residential property sectors are seeing the proverbial light at the end of the tunnel and will likely recover from pandemic-induced disruptions starting next year as the economy further reopens, according to property consulting firm Colliers Philippines. The retail or shopping mall segment, on the other hand, could benefit from improved consumer traffic starting 2022 as mobility restrictions are eased and as the country’s vaccination numbers further increase.
However, mall vacancy rates could remain high with the influx of new supply in Metro Manila. A gradual improvement is projected starting 2023.
In its third quarter report issued on Friday, Colliers reported that outsourcing and traditional corporate occupiers continued to drive office demand in Metro Manila, albeit net absorption of office space would remain negative in 2021 with the influx of new supply. New deals are expected to pick up in 2022.
New office supply in the third quarter reached 156,600 square meters, surging by 102 percent year-on-year. More will open this fourth quarter in the Bay Area, Alabang, Makati central business district and its fringes.
Average office lease rates are projected to continue to decline due to subdued leasing and rising office vacancy, but a slow recovery starting 2022 is anticipated.
Office vacancy rate continued to rise to 13.9 percent in the third quarter and is projected by Colliers to end this year at an average of 15.6 percent as precommitment among occupiers of upcoming buildings remained muted.
“With the amount of supply coming in 2022, we see that the 15.6-percent [vacancy rate] would still increase to around 17 percent. But I think that that will be it. That’s going to be the start of the vacancy decline in line with the rebound of the market,” Colliers director Dom Fredrick Andaya said in a briefing on Friday.
Office tenants were urged to henceforth prepare for employees returning to the office, while also renovating space and assessing the optimal level of operations that could be split with work-from-home workforce.
Landlords, on the other hand, were urged to highlight value-added features alongside wellness and green building certifications.
On Metro Manila’s residential market, while average vacancy rates may continue to increase by the end of this year due to the delivery of new condominium units, Colliers expects this to recede in 2022, backed by office leasing recovery.
Rental rates rise seen
In the third quarter, vacancy at Metro Manila’s secondary residential space reached 17.6 percent from 17.1 percent in the second quarter due to new project completions. Colliers expects the vacancy rate to peak at 17.9 percent this yearend, before slightly easing to about 17.3 percent in 2022 and further to 16.9 percent in 2023. Rental rates are likewise seen to pick up starting next year.
“In our view, demand in both the preselling and secondary markets is likely to pick up on the back of an economic rebound, increase in vaccinations and further easing of mobility restrictions across the country. This confidence should also result in improved office space absorption in Metro Manila by the latter half of 2022 which should signal the gradual recovery of condominium rents and prices during the period,” Colliers associate director Joey Bondoc said.
Compared to Colliers’ projected 5-15 percent drop in residential land values at the beginning of this year, Bondoc said these land values were now expected to stabilize.
In the retail segment, Colliers urged mall developers to be cautious of new supply coming in the next 12 to 24 months.
This 2021, retail vacancy continued to rise as brick-and-mortar retailers vacated space. Colliers projects vacancy to rise to 17 percent in 2022 given constricted consumer spending and limited mall visits due to mobility restrictions, before a gradual improvement by 2023, according to Bondoc.
Shopping mall rents are projected to drop by 5 percent in 2021, or at a slower pace compared to the 10-percent decline in 2020. Rents are expected to rebound, albeit slowly, by 2022.
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