Manila retail net absorption hits -27,000sqm in Q3

Blame it on the partial opening of Gateway Mall 2.

According to a JLL report, retail net absorption in Manila declined and settled at -27,000 sqm in 3Q23. However, the steep decline was mainly due to the partial opening of Gateway Mall 2, which was mostly vacant. 

Store openings increased during the quarter by 66.7% q-o-q as the holidays approached, led by F&B at 22.4% and General Retail at 14.1%. Notably, Muji opened its biggest branch in Quezon City in the quarter.

Here’s more from JLL:

Store closures increased at a rate of 63.1% q-o-q in 3Q23. However, it is noteworthy that store openings still exceed closures by 93.0%. Stores in the F&B sector contributed 24.5% of all store closures, which include Eatogether, a food hall in Mandaluyong City. Sports and fitness spaces also continued to move out, adding up to 16% of the total closures, such as Fitness First in Mandaluyong City.

Additional supply in 3Q23 pushes vacancy upward

The partial opening of Gateway Mall 2 added approximately 31,100 sqm of retail space in 3Q23. Its completion can potentially add another 20,000 sqm, which may also contribute to higher vacancy levels by year-end. 

The vacancy rate increased by 93.4 bps q-o-q to 7.1% in 3Q23, mainly due to the partial opening of Gateway Mall 2, which remains mostly vacant. However, existing malls still recorded an improvement in vacancy levels, with more store openings than closures.

Rents remain unchanged as market activities stay muted

Rent on retail spaces remained unmoved at PHP 1,683 per sqm, per month, as operators held rates due to slow movement in leasing and the potential to invite more lessors.

Capital values contracted to PHP 229,232 per sqm in 3Q23, which is a negligible decline from the previous quarter. Investments from foreign brands increased by 174.9% q-o-q, with the largest contributors being in the Clothing and Apparel sector.

Outlook: Holiday season is expected to boost retail market activity

Upcoming stores are expected to push through in the last quarter of the year as the holiday season comes into view. Additionally, new developments are expected to open new retail spaces that will raise vacancy levels as they go on stream with few initial stores.

Rents are expected to rise in the coming quarter as we see a healthier leasing market. Similarly, capital values may follow the uptick in prices as we expect more activity in the retail sector.

Note: Manila Retail refers to metro Manila's overall prime retail market.