JLL Philippines holds first client hybrid event, says market stabilized despite headwinds in Q1 2022

On May 5, JLL Philippines held their first hybrid market overview event. Titled “The Physical Workspace: A Pillar of Corporate Culture,” the event was hosted by JLL Philippines’ Country Head, Joey Radovan. Members of the panel include Janlo de los Reyes (JLL Philippines Head of Research and Strategic Consulting), Christopher Street (JLL APAC’s Head of Data Centres), Charlie McNaught (JLL Philippines Director for Logistics), and Lizanne Tan (JLL Philippines Head of Office Leasing Advisory). The event was attended by audiences both online and on-site, as well as JLL’s CEO of Southeast Asia, Chris Fossick.

The market overview identifies key factors that underpin market momentum—increasing return to office (RTO), improving outlook, and opening of borders. Focus was given to Metro Manila’s office, retail, residential, and hospitality sectors, as well as the local logistics space, and APAC data centers.

Janlo de los Reyes, JLL Philippines’ Head of Research and Strategic Consulting, provided an overview of the office, retail, residential, and hospitality sectors in Metro Manila for the first quarter of 2022. “The market is stabilizing and gaining momentum despite the headwinds,” says de los Reyes. 

In the office sector, there is a rebound in leasing volumes (from 75,713 sqm in the fourth quarter of 2021 to 132,385 sqm in the first quarter of 2022) as occupiers push through with planned entry and expansion. IT-BPOs continue to drive leasing activity. Rental market also remains stable.

Lizanne Tan, JLL Philippines’ Head of Office Leasing Advisory, said that a lot of companies are assessing how to move forward with return to office (RTO). She cites kinds of business and employee functions as some of the factors that organizations consider in their RTO policies.

There is a significant slowdown in retail activity, with store openings dropping by 94% compared to the previous quarter. Top categories (based on store size in sqm) for move-ins include food and beverage, toys, and general retail; while move-outs include clothing and apparel, food and beverage, and footwear. 

Meanwhile in the residential sector, there is a dichotomy between lease and sale markets. The increasing RTO continues to drive vacancies lower, as people are moving back from the province to stay in units near their workplaces. Unit prices continue to increase for both midscale and luxury segments, but favorable payment terms for midscale RFO drive sales take-up.

Sustained leisure and pent-up business travel buoy occupancy in the hospitality sector. Leisure hotels register higher occupancy than mixed-use and quarantine hotels. Room rates are now 5.8% higher than the previous quarter, but still below pre-pandemic levels.The luxury room segment has the highest lift, now averaging PHP14,277/room/night, which is close to the segment’s pre-pandemic rate of PHP15,269/room/night.

Logistics

“E-commerce and logistics companies remain key sources of demand in Southeast Asia,” says Charlie McNaught, JLL Philippines Director for Logistics. There is annual rental growth of 2.1% in APAC during 2021, and SEA reached 3.0%. Across all markets, modern stock is the focus of occupiers as they try to modernize their portfolios. “To improve their efficiency, supply chain networks remain a key focus. A lot of occupiers shift from a just-in-time supply chain model to a just-in-case,” adds McNaught. This is essentially leading to more and larger warehouse requirements. 

‘McNaught also presented a case study from Vancouver, Canada focused on the transformation of a former manufacturing site into a modern logistics business park. To transform the site, focus was placed on flexible and human-centric design, as well as grade A specifications. “Interestingly, the business park also includes Canada’s first multi-storey facility. With land allocated for logistics and industrial at a premium, they decided to increase the site density by building vertical,” adds McNaught. 

The Logistics presentation is concluded with a report on trends in the Philippine market: growth in prime stock, ESG focus, larger requirements, multi-storey developments, and grade A logistics parks.

“Asia-Pacific is the largest co-location data center in the world, surpassing North America a couple of years ago in terms of third party data centers” says Christopher Street, JLL APAC’s Head of Data Centres. Street says data center growth in the Philippines has been consistent and encouraging. “In the Philippines, there’s a significant domestic market which is fantastic for long-term growth and stability of digital infrastructure,” he adds. 

”It is also important to look at in terms of different business models,” says Street, citing retail, wholesale, and mixed as main business models. “Retail, operating on 2-3 year contract terms, is either managed by service operators (telecommunications firms) or you’ll see interconnection. I think that’s where the Philippines is on the brink of,” says Street. He also talks about wholesale or hyperscale sites, and says that these models operate on longer (around 5 to 10 year) contract terms.

Two main points contribute to the improving outlook towards the end of the first quarter of 2022. First, the figure for COVID-19 cases in March 2022 is 97.6% lower than January 2022. Second, the forecasted GDP growth for 2022 (according to figures from the ADB, WB and IMF) is at 5.7% to 6.5%. de los Reyes also says that the supply pressure will weigh down on recovery, but greater optimism can provide legs for market momentum.

JLL has been operating in the Philippines about 5.3 million square meters of real estate with a workforce of over 1,200 employees. With more than two decades of local expertise working hand-in-hand with its global legacy, JLL provides to the Philippine real estate market an unparalleled synergy of services with a strong commitment to achieve real estate ambitions through future-ready approaches. For further information, visit www.jll.com.ph