Philippine retail rents slip -0.8% in Q2 for the first time since 2009

Metro Manila landlords have become more lenient as they strive to retain contracts.

According to JLL, Manila retail spaces recorded a net absorption of -2,300 sqm in Q2 2020 due to store closures of mostly fashion tenants, caused by loss of sales and logistical challenges.

Malls started to reopen in the quarter, but were experiencing low foot traffic due to the subdued consumer activity and controlled density within developments mandated by the government.

Here's more from JLL:

Vacancy inches up due to store closures

No mall developments completed in 2Q20 due to delays as Metro Manila underwent Enhanced Community Quarantine (ECQ) and halted construction activity. Only select constructions were allowed during the ECQ, such as manufacturing, offshoring and outsourcing, and housing, to name a few.

Overall Metro Manila vacancy slightly rose by 10 basis points to 5.0% in 2Q20 from 4.9% in 1Q19, as no new stores opened. Furthermore, some stores were forced to close due to sales and logistical challenges during the lockdown.

Landlords offer discounted rates to retain tenants

Rents declined by -0.8% q-o-q, the first time since 3Q09, despite the 3.0% y-o-y growth, as landlords are open for flexible terms to support existing tenants, attract new tenants, and retain contracts.

Vista Land and Lifescapes, Inc. introduced a new home and construction retail concept, AllHome Quick Fix, which targets the growing hyperlocal market.

Outlook: Mall operators venture to online platforms

Megaworld Corp. is set to roll out its digital platforms to enhance their customer experience and support their retail tenants. Moreover, SM Investments Corp. have been tapping e-commerce channels in order to boost sales during the pandemic.

Despite the resumption of select construction activities under the General Community Quarantine (GCQ) status, about 346,000 sqm from 2020 pipeline is projected to slip to 2021.