News release

Investment opportunities to ease headwinds weighing down market recovery

JLL Philippines presented a Metro Manila market overview for Q3 2022, and discussed investment opportunities to assist in real estate market recovery

October 28, 2022

Jikka Defiño

Asst. Manager – Marketing Communications

Headwinds are seen to weigh down on market recovery, but there are several investment opportunities in the real estate market. In JLL’s Metro Manila real estate overview for the third quarter of 2022, speakers present an overview of the office, residential, hospitality, and retail sectors, and identify where to focus resources on the remaining months of 2022.

IT-BPM continue to drive the office market

IT-BPMs, particularly the financial (banking) sector, remained the top office demand driver in the third quarter of 2022, accounting for 85.3% of closed transactions, while corporate occupiers made up 8.7%. Office pull-outs also moderated, from 135,300 sqm last quarter to 93,400 sqm. The sustained recovery of leasing volumes and deceleration of move-outs and lease terminations aided in the decline of vacancy levels which ended at 17.3%, down by 45.9 bps quarter-on-quarter, amid new supply.

“The future of work sways toward continued return to office, as we saw 62% of clients operate back to pre-pandemic levels by the end of the third quarter of 2022,” said Janlo de los Reyes, Head of Research and Strategic Consulting at JLL Philippines.

Headline rents remained relatively stable and saw an incremental contraction of 0.1% quarter-on-quarter. However, the gap between headline and transacted rents further narrowed, closing at 5.9% compared to 9.0% last quarter and a steep decline from 19.9% in the third quarter of last year, as landlords remained optimistic of the improving leasing demand.

Delayed store openings as retailers gear up for the holiday season

In the retail sector, store closures slightly out-pacing store openings, delayed opening of upcoming brands, and introduction of new supply (5,300 sqm increase in stock from last quarter) contributed to uptick in vacancy levels. The food and beverage (F&B) category continued to lead both store openings and store closures (in sqm) at 27.9% and 26.1%, respectively. Closing the top five categories for store openings are clothing and apparel, food and groceries, leisure, sports and fitness, while the remaining four categories for store closures are footwear, leisure, clothing and apparel, and general retail.

Retail rents continue gradual recovery, now averaging PHP 1,611 per sqm per month. Rents are anticipated to sustain its upward trajectory towards year-end in time for the peak holiday season.

Increase in sales take-up and prices

The residential leasing market remained moved sideways and saw an incremental uptick in vacancy levels during the third quarter, owing primarily to new stock. Meanwhile, rents remained stable compared to previous quarters, although a dichotomy was recorded wherein rates commanded by midscale developments saw an increase, while a slight contraction on upscale and luxury rentals was recorded.

The sale market, on the other hand, saw an improvement where take-up grew relative to previous quarters for both the ready-for-occupancy and pre-selling markets despite economic pressures which may weigh down on investment sentiments. “Interesting note here is that the upscale and luxury segment performed better than the midscale market in terms of quarter-on-quarter absorption growth rates. We may be seeing the early effects of higher interest rate which may be more felt by the middle-class market,” says Karisse Garcia, Manager for Research & Strategic Consulting at JLL Philippines.

Prices continued to appreciate for both ready-for-occupancy and pre-selling as developers try to catch-up on prices after delaying the usual price hikes during the peak of the pandemic. Flexible payment terms such as lower down payment and stretched payment period were actively offered to lift some of the burden coming from price hikes and higher interest rates from buyers, and in turn, fuel investment activities.

Steady demand from corporate and leisure guest pulled up occupancy levels

Recovering demand lifts overall occupancy, rising from 77.1% from 61.8% last quarter, mainly driven by demand coming from corporate bookings, leisure guests, and the re-emergence of the Meetings, Incentives, Conferences and Exhibitions (MICE) market. Likewise, room rates continued to climb, now averaging PHP 6,865 per room per night, as hotel operators gear up towards the holiday season.

Closing his presentation, de los Reyes advised market cautiousness against headwinds. “On a macroeconomic scale, we see three major headwinds: inflation, higher interest rates, and a weaker peso-dollar exchange rate. In real estate, these headwinds may translate to higher cost of investment, higher capital and operating expense, and possibly curbed spending.”

Real estate investment opportunities and Philippine REITs

“Makati Business District land values have consistently risen, experiencing momentary dips during times of financial crises, notably the Asian Financial Crisis in 1997 and the Global Financial Crisis in 2008,” said P. Ryan Isip, Head of Capital Markets at JLL Philippines. Mr. Isip stressed the importance being extremely selective in evaluating opportunities during such situations. “At JLL, we are focused on delivering yielding assets.” Mr. Isip added REITs will bring more liquidity & better transparency to the Philippines. “We see extremely good value in both equities & real estate assets at this time,” he said.

“There are currently seven active REITs, five of which are mainly related to office developments,” said Paolo Azurin, Head of Philippine Investment Banking at CLSA. When investing in REITs, Azurin said that investors must look into high quality REITs, which are composed of the following attributes: established sponsor presence, reputable track record from board of directors and management teams, a good portfolio size, high market capitalization and free float levels, investment strategy, compelling growth story, and valuation and yield.

Ultimately, Azurin presented REITs as one of three investment opportunities in real estate—the other two being direct real estate and listed property company—and compared these investment vehicles based on cash flow, dividend policy, risk profile, investor involvement, initial and maintaining cash outlay, and liquidity. In these aspects, REITs have, respectively: stable cash flow from operations, 90% dividend output, low risk (and are passive investments), control from property and fund managers, relatively lower cash outlay, no maintaining cost, and little to no impact on value once sold (liquid).

Closing the event, Joey Radovan, JLL Philippines' Country Head, said "there is no better time to invest than now. It's just a matter of finding the investment and resources. With that, JLL is here to help you."

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries and a global workforce of more than 102,000 as of June 30, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit