Vacancy rates in the retail property market are expected to rise in the coming quarters as a result of more than ample supply coming online until 2019, according to a real estate services firm.
In a report, Jones Lang Lasalle (JLL) noted around 324,000 square meters of retail space is set to be completed by the second half of 2016, in Metro Manila alone.
“The high volume of supply in 2016 is likely to push the vacancy rate upwards,” JLL said.
In the first quarter of the year, approximately 140,000 square meters of retail space was added to Metro Manila’s retail stock.
This was mainly contributed by the opening of three retail developments by Megaworld Corp., namely Uptown Place Mall, Uptown Parade, and Venice Grand Canal Mall, all located in Taguig City.
According to data by Colliers International, the Metro Manila retail stock reached 6.12 million square meters in the first quarter of 2016.
Colliers noted that rental rates in some areas are expected to slightly rise in the coming quarters despite the high rise in available retail space.
“Colliers is projecting retail rents in Ayala Center and Ortigas Center to grow between 4 percent and 6 percent over the next 12 months,” the real estate consultancy said.
In the first quarter of the year, the average rent in the Ayala Center reached P1,505 per square meter a month, up 2.7 percent from P1,465 per square meter in the third quarter of 2015. Meanwhile, the average rental rates in Ortigas Center rose by 4.9 percent to P1,353 per square meter per month.
JLL echoed Colliers’ sentiment, saying the rise in rental rates in the coming quarters will be driven mainly by the entry of foreign brands in the country and as well as the expansion plans of local players.
“Although supply of retail space is projected to increase, rents are still expected to grow moderately, supported by the continued interest of local and foreign brands to enter and expand their operations in Metro Manila,” JLL said.
Demand for retail space in the first quarter of the year was mainly driven by foreign brands, according to JLL.
The real estate services firm noted most of the new foreign brands that entered the market in the first quarter were from the Food and Beverage (F&B) sector. Some of these brands
are Peperoni Pizzeria, Morganfield’s, and The Dessert Kitchen.
“On the other hand, other international brands continued to expand their operations in major malls,” JLL said.” These brands include F&B stores Nadai Fujisoba, Halal Guys, Mr. Pizza, and Tous Les Jours. Clothing and fashion brands such as Sfera and Gant also expanded their presence in major malls in Metro Manila.”
In the second half of the year, more foreign brands are expected to enter the country including Texas Roadhouse, Denny’s and Moe’s Southwest Grill.