Manila retail absorption turns negative as retailers restructure

The city recorded net absorption of -21,800sqm in Q2.

Manila's retail market recorded negative net absorption in the second quarter of 2026 as retailer restructuring and new supply pushed vacancy higher, although rents and capital values continued to rise, according to JLL.

Net absorption stood at -21,800 sq m in Q2, reflecting increased vacancy and slower leasing activity as some retailers exited locations to restructure operations and reposition their business models. Local food and beverage brands continued to account for a significant share of new openings, taking advantage of stable consumer spending to expand, although F&B operators also recorded the most closures as businesses consolidated underperforming stores.

Approximately 26,000 sq m of new retail space entered the market during the quarter, with a further 160,000 sq m expected to be delivered by year-end. The additional supply, combined with softer leasing activity, lifted overall vacancy to 5.8%, an increase of 75.1 basis points quarter on quarter.

Despite the softer absorption picture, pricing remained positive. Average retail rents reached PHP 1,783 per sq m per month, up 0.4% quarter on quarter and 1.4% year on year. Capital values increased 0.3% quarter on quarter to PHP 243,864 per sq m, which JLL attributed to sustained retailer interest in the sector.

JLL expects moderate expansion to continue through the rest of 2026. New supply is likely to be concentrated in food and beverage, clothing and apparel, and general retail as mall operators prioritise categories capable of generating sustained footfall and tenant engagement.

Rental growth is expected to remain modest through year-end as occupier activity improves, although the incoming supply pipeline could constrain landlords' pricing power as competition for quality tenants intensifies, according to JLL.