Property giant Megaworld Corporation and global real estate services firm Jones Lang LaSalle (JLL) Philippines have entered into a strategic partnership that will enable JLL to provide top-tier strategic advisory services to Megaworld. This collaboration focuses on bringing international real estate standards to the forefront of Megaworld’s operations, with an emphasis on research, consulting, and project development.
In line with this, JLL has recently released its Q3 2024 Metro Manila market overview, which highlights mixed performances across the office, retail, and hospitality sectors.
Office Leasing: Stability Amid Supply Pressures and Falling Rents
The office leasing market showed stable demand, but challenges persist. According to Janlo delos Reyes, Head of Research and Strategic Consulting at JLL Philippines, while demand for office leasing remains steady, the low pre-commitment levels on new spaces continue to exert supply pressure, keeping rental rates soft.
In Q3, office leasing activity grew by 31.2% year-on-year, driven primarily by corporate tenants, which made up 54.4% of the demand. Government agencies led the charge, while BPO firms, although contributing less to the overall demand, are expected to accelerate activity in the coming months.
Despite a decrease in vacancy rates to 19%, total released office space increased by 6.5% year-on-year. Low pre-commitment levels for new spaces could push vacancy rates to 20% in the medium term. With leasing conditions softening, rental prices are anticipated to decline further, potentially reaching Php 970/sqm/month.
“Leasing trends, especially vacancies, and rental rates are largely shaped by supply dynamics and businesses reevaluating their office space needs due to downsizing or expansion strategies,” said Delos Reyes. He added that hybrid work arrangements are expected to remain a dominant factor into 2025.
Retail Sector Poised for Holiday Growth
The retail sector is gearing up for a strong end-of-year performance. The third quarter saw a consistent increase in store openings, with food and beverage continuing to dominate, accounting for 27.6% of new openings and 26.1% of closures.
Vacancy rates in the retail sector rose slightly to 6.9% due to new mall openings but are expected to decrease to 6.5% by year-end. The demand from both local and foreign brands expanding their footprints, coupled with the absence of significant new supply entering the market, will drive this improvement.
Hospitality Sector Sees Strong Recovery
The hospitality sector continues to rebound, with hotel occupancy rates reaching 76.9% in Q3. This growth was fueled by a robust tourism industry, which saw international tourist arrivals reach 4.4 million as of September 2024, marking a 9.9% increase year-on-year.
The average room rate rose to Php 7,971 per night, showing a 2.2% quarter-on-quarter and 3.8% year-on-year increase. By the end of 2024, rates are expected to surpass Php 8,000 per night.
Outlook: Supply Pressures and Key Policy Considerations
Looking ahead, the real estate market in Metro Manila faces substantial supply pressures across all sectors. By 2028, 1.1 million square meters of office space, 283,000 square meters of retail space, and 3,900 new hotel rooms will be introduced into the market.
“Metro Manila’s real estate performance is heavily influenced by space rationalization strategies and supply pressures,” Delos Reyes noted. “It’s crucial to monitor these key indicators to help developers and decision-makers navigate the evolving market conditions in the months to come.”
