Real estate markets post all-time high vacancy rates

The logistics sector is the lone silver lining in the domestic real estate market in this pandemic as all others are experiencing all-time high vacancy rates, according to a leading property management and consultancy firm. 

“The current overall the vacancy levels across sectors (except for Grade A logistics) are at an all time high relative to recent years,” said Janlo de los Reyes, head of Research and Consulting JLL Philippines, at the Q1 2021 Real Estate briefing.

He, however, said that hotel occupancy and residential vacancy were at their lowest in the third quarter of 2020 at 17 percent and 8.2 percent, respectively.

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Based on JLL’s data, overall occupancy for logistics supply is at 91.1 percent as majority of stock is build-to-suit in nature. As for speculative logistics supply, occupancy is healthy at 72.7 percent.

JLL also said the logistics sector’s supply addition remained on track as of Q1 this year with the completion of 45,800 sqm from two developments, propelling total stock to 1.6 million sqm. There is also confirmed upcoming supply of 190,000 sqm this year.  

Fast moving consumer goods account for 32.5 percent and third party logistics with 28.6 percent led the tenant share for existing logistics stock, growing exponentially since the pandemic began. 

Comparatively, the office space sector has an overall vacancy breached double-digit territory at 14.7 percent with large scale moveouts from POGOs and offshoring and outsourcing firms. 

Supply stock still remained at 9.8 million sqm and projected supply has been deferred to the second half this year. Around 1.6 million sqm of new office space is expected until 2024. 

For residential, the vacancy rate rose to 7.3 percent in Q1 2021 as lease damand slowed specifically in March. 

Notably, monthly rents fell 1.2 percent quarter on quarter and 19.8 percent year on year as landlords adapted to the demand decline by discounting rents to minimize vacancies. There has been an overall decline in selling prices in Q1 this year. Ready for occupancy prices decreased to 186,600 sqm while pre-selling prices registered at P215,600 sqm.

For the retail sector, the shopping mall vacancy in Metro Manila surged to 6.6 percent amide continuous store closures and pullouts led by food and beverages and fashion brands. 

JLL said that net closures in the first quarter of 2021 exceeded 22,000 sqm, coming mostly from a mix of local and foreign fashion accounting for 38.5 percent, F&B with 23.5 percent, and footwear with 10.7 percent share. 

Retail rents dipped to P1,730 per sqm per month pulled by some mall operators to remedy high-vacancy malls. 

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In addition, the hospitality market continues to struggle as occupancy decreased to 20.9 percent. Demand is mostly from repatriated workers in need of quarantine stays. 

Room rates also exhibited another decline at P5.400 per room per night, down 18.7 percent quarter on quarter and 36 percent year on year. 

The hospitality market has existing supply at 40,200 rooms while upcoming supply in the next three years amounted to 8,900 rooms.

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Article and Photo originally posted by Manila Bulletin last May 3, 2021 5:30am and written by Bernie Cahiles-Magkilat.

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