Residential vacancy rates in Manila hit double-digit record of 11% in Q2

The last time vacancy hit double digits was in 2005.

According to JLL, the lockdown led to delays in construction completions and turnovers of residential condominiums. Delayed developments included Garden Towers – Tower 2 in Makati CBD by Ayala Land, Inc. and Times Square West in BGC by Federal Land, Inc. Both developments slipped to 2H20 for completion.

The quarantine and halt in business activity resulted in the pullout of expatriates and foreign staff, leading to the pre-termination of corporate leases. This bumped the average vacancy rate to 11.0% in 2Q20 from 5.5% in 1Q20. The last time vacancy hit double digits was in 2005.

Here’s more from JLL:

Investors keep sales afloat, corporate housing drives leases

Local high-net-worth individuals (HNWIs), upper-middle class households, and foreign investors continued to drive sales demand, taking advantage of accommodative payment terms by developers and sellers.

The lease market faced weaker demand due to repatriations and expatriate reassignments, resulting in cancelled leases and fewer enquiries.

Capital values maintain stable growth while rents decline

Developers offered flexible payment terms to generate sales, boosting average capital value to PHP 268,398 per sqm, up by 6.2% q-o-q and 16.8% y-o-y.

The weaker leasing activity has led to a dip in rental rates, recording PHP 834 per sqm per month, down by 2.8% q-o-q, as landlords lowered rents to attract tenants.

Outlook: Positive investor interest to sustain stable sales

Construction delays are anticipated to defer development completions to 2021. This may likely result in the influx of upcoming supply and higher vacancies. Although, this may be tempered by the slow rebound of the leasing market in the medium term.

The sales market is expected to maintain steady growth due to sustained buyer interest. This is supported by the forecast favourable interest rate environment as the central bank may retain or cut policy rates to stimulate economic activity.