Manila to see nearly 2,000 residential units by year-end

The city’s recovering vacancy rates are expected to be dampened by the launch of new units.

No new units were turned over in Manila’s residential market in 3Q23. However, according to JLL, 1,900 units are anticipated by year-end, likely impeding the ongoing recovery of vacancy levels.

The vacancy rate saw a nominal contraction of 7.1%, declining 3.9 bps q-o-q. The stable supply and positive trajectory of net absorption carried the slight improvement in vacancy levels.  

Here’s more from JLL:

Net absorption recorded at 27 units in 3Q23, retaining a positive performance, albeit with relatively low growth. Elevated interest rates, with a lack of improvement in return-to-office (RTO) rates despite an uptick in office leasing volume, have directly influenced leasing activities. Executives, foreign expatriates and industrial businessmen continued to buoy activities in the market.

Investment activities in the residential segment continued to be challenged with interest rates remaining high, pushing some investors to delay purchases. 

Prices stay resilient, while rents fall due to low demand

Rents concluded their upward trend in the previous quarters, settling at PHP 826.3 per sqm, per month, a -0.3% decline q-o-q. Unit owners lowered rents on account of the stable but minute growth of leasing activities.

Meanwhile, capital values expanded and settled at PHP 286,168 per sqm, a 1.3% hike q-o-q, despite a lean market. Interest for prime assets remained solid, especially for select developments that recorded healthy take-up and limited available units, which pushed up prices cautiously despite interest rates remaining elevated.

Outlook: Rents and prices to sustain slow recovery until year-end

The volume of new supply anticipated to enter the market by year-end, the slow uptick in RTO levels and economic headwinds may raise vacancy levels in the near term. Nevertheless, investment activities are expected to gradually improve until year-end, amidst uncertainty.

Incremental upticks in rents and prices are still projected by the end of the year, driven by new, prime assets slated to enter the market. These, as well as better-performing assets that have more room to raise rates, are likely to lift the market average. However, growth is expected to remain slow due to a leaner market. 

Note: Manila Residential refers to the Makati City and Taguig City mid-high and luxury residential market.