Manila records lowest residential vacancy since the pandemic hit

Vacancy improved to 9% in Q1 2021, the lowest since Q2 2020.

Leasing activity improved slightly in 1Q21, and JLL says this is due to an increase in transactions for upscale developments coming from expatriate employees in MNCs and O&O firms in January and February.

Sales market activity remained stable on the back of sustained buyer interest coming from local high-net-worth individuals (HNWIs), purchasing secondary market units. There were also units sold for end-use (e.g. newly-wed couples who took advantage of the sale promotions).

Here’s more from JLL:

Subdued vacancy on the back of a slowdown in leasing demand

Residential vacancy improved to 9.0% in 1Q21 from 9.1% in 4Q20, due to recorded leases during the first two months of the year. This was the lowest since the COVID-19 pandemic hit the country, reaching 11.0% in 2Q20.

Continued supply slippage led to no new completions in 1Q21. Around 50% of the 2021 pipeline will come from 2020.

Rents and prices incrementally grow despite demand challenges

Average rents grew by 0.2% q-o-q to PHP 833 per sqm per month in 1Q21. The minimal increase was due to the asking rents from newer developments.

Average capital value inched up by 1.3% to PHP 273,355 per sqm in 1Q21. Prices from newer developments introduced to the secondary market pushed overall capital values higher.

Outlook: Highest supply expansion expected due to 2020 slippages

An influx of additional supply is expected to keep vacancy at an elevated level, approaching the double-digit rate once again observed in 2Q20.

Housing for expatriate employees is anticipated to sustain leasing demand. However, tenants are seen to favour newer and better-quality upscale developments. This may push landlords of older developments to lower the rents, leading to a cap in the upside of overall rents.

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