SLOWER THAN EXPECTED ECONOMIC RECOVERY
The Philippines recorded an 11.5% contraction in the Gross Domestic Product (GDP) in Q3 2020, albeit a slight improvement from the -16.9% GDP growth rate recorded in Q2 2020. Despite initially easing community quarantine measures, Metro Manila and the neighboring areas, as well as key urban centers such as Metro Cebu and Metro Davao reverted to stricter quarantine measures for 2 weeks in mid-Q3 2020 . The Industry and Services sectors contracted by 17.2% and 10.6%, respectively, while the Agriculture sector posted growth of 1.2%. Average GDP contraction from Q1 2020 to Q3 2020 was estimated at 10%, well-above the government’s target of 5.5% for full-year 2020.
MORE CONSTRUCTION DELAYS CONFIRMED, VACANCY CONTINUES TO INCREASE
Prime and Grade A Metro Manila office supply stood at 8.2 million square meters (sq.m.) by end-2020. The total stock grew by 376,000 sq.m. which represents only 45% of the stock originally scheduled for completion in 2020. Of the estimated 1.4 million sq.m. expected to be completed in the next four (4) years, over 509,000 sq.m. of projects have been pushed by at least six (6) months, with over 169,000 sq.m. of which having adjusted completion dates of over two (2) years from their respective intended completion dates.
Overall vacancy rates also increased by 145 basis points to 7.8%, driven mainly by the continued flight of the Philippine Offshore Gaming Operators (POGO) locators. The re-opening of previously-committed spaces in recently-completed buildings due to indefinitely suspended expansion plans is also pushing vacancy rates further upwards.
RENTS STARTING TO DECLINE
As demand remained generally muted, average rents in Metro Manila declined by 0.1% quarter-on-quarter (qoq) and settled at PHP1,027/sq.m./mo., although still 2.31% higher when compared with its year ago-level. While average rents in the main CBDs – Makati CBD and Bonifacio Global City – were relatively unchanged, the qoq decline was mainly due to the downward adjustments in the asking rents of developments located outside of the main CBDs.