By Adrian Paul B. Conoza, Special Features Assistant Editor
Two years after the global health crisis caused by the coronavirus disease 2019 (COVID-19) turned out as well to be a global economic crisis, recovery outlooks for the Philippine property industry are becoming clearer.
The outlook published by professional real estate services company Colliers Philippines last December highlights that the Philippine property market is “raring to roar back” this year, with an improving vaccination rate and rising consumer and business confidence providing a “much-needed boost.”
“In our view, office, residential, retail, and industrial sectors will benefit from a macroeconomic rebound. Landlords should prepare to capture pent-up demand while tenants and investors should maximize opportunities as the market is on its way to recovery,” Joey Roi H. Bondoc, associate director for research at Colliers Philippines, wrote in the outlook.
For professional services firm Jones Lang LaSalle (JLL), on the other hand, the real estate market is expected to move with cautious optimism in 2022. While market sentiment is improving, a mixed outlook remains.
“We also expect new supply or significant supply expansion in 2022 on office, retail, hospitality and residential to exert pressure in terms of real estate market performance,” Janlo C. de los Reyes, head of research and consultancy at JLL Philippines, was quoted as saying in a webinar on the firm’s latest overview of the market last January.
In the office market, Mr. de los Reyes sees stabilized performance in the office market, as hinted by figures in the fourth quarter (Q4) of 2021.
“For Q4 2021, what we saw was a moderate take-up of 75,713 sq.m. (square meters) in gross leasing volumes,” Mr. de los Reyes said, adding that while the number is lower than previous quarters, there is still improved sentiment in the market as compliance concerns, rightsizing, and halt in vacancy uptick contributed much to Q4 figures.
Amid this foreseen stabilized performance, subdued leasing activity is predicted in the first half of 2022. “In terms of elections, we see that leasing activities may slow down in the first half of 2022 as more investors and occupiers postpone their leasing decisions as they wait and see where policies might change,” Mr. de los Reyes said.
Mr. de los Reyes added that as companies still evaluate what the future office spaces would look like, what is certain is the growing “acceptance of a hybrid work model across occupiers, meaning they’re open to having a percentage of their work force work remotely.”
Expecting new supply to reach 723,400 sq.m., Colliers expects some firms, including outsourcing companies, to continue looking for office space across the country, amid the implementation of work-from-home arrangements.
“We see these leasing queries materializing over the next 12 months which would anchor a recovery in office space take-up within and outside Metro Manila,” the firm’s outlook read, adding that it also sees a potential rebound in office space absorption this year with the improvement in business sentiment in the next 12 months complemented by greater vaccination rates.
Colliers also look forward to more landlords and occupiers embracing “the healthy and sustainable route to office development and leasing.”
“We believe that the adoption of sustainable office spaces plays a crucial role in future-proofing office towers beyond 2022,” Colliers’ report explained. “In our view, there will likely be a heightened preference for sustainable buildings that provide natural lighting and optimize air quality, among other features. Over the next three to five years, these features should result in utility and talent acquisition cost savings, and contribute to healthier and more productive work force.”
Positive outlooks are also seen in retail. JLL observed sustained easing of vacancy levels across Metro Manila due to retail store openings taking advantage of the holiday season. “Store openings have outpaced closures, with a huge chunk of that coming from IKEA opening around 65,000 sq.m. of retail space,” Mr. de los Reyes said.
The firm also noted that expansions currently drive store openings, led by food and beverage (26.6%) and home appliances and furniture (21.5%) categories.
Colliers, meanwhile, sees the delivery of 523,700 sq.m. of new retail space, coupled with recovery in rents backed by increasing vaccinations and a rise in consumer spending.
“In our view, the Filipinos’ growing propensity to shop online is among the top factors that will likely influence physical mall space absorption beyond 2022,” Colliers’ report added. Given this observation, the firm recommends that retailers expand their e-commerce presence and maximize technological advantages. Mall operators, meanwhile, are recommended to be flexible with their space usage by maximizing their space for opening pop-up stores and utilizing available facilities such as activity centers for COVID vaccination drives as well as introducing alternative dining options.
Mixed performance is predicted by JLL for the residential segment. The vacancy rate in residential condominiums is observed to have significantly eased (from 6.8 % to 5.1%) due to relaxed restrictions and higher return to office in Q4. “Return to office has led to the increase in demand from professionals working in the business hubs, who may have reactivated their leases or are looking for accommodation near their workplace,” Mr. de los Reyes said.
In addition, the midscale segment improved in terms of vacancy levels (with rent inching up to P720 per sq.m.) while upscale and luxury registered higher vacancy (with rent around P1,015 sq.m.).
Colliers, meanwhile, sees major infrastructure projects (i.e., NLEx SLEx Connector, North-South Commuter Railway, Central Luzon Link Expressway), expected to be completed in 12-36 months, to raise land values outside the capital region, aside from improving connectivity.
“Colliers believes that the government’s decentralization program and major public infrastructure projects should push developers to launch more master-planned communities outside of Metro Manila,” the firm’s report stressed.
Leisure and hotels
Regarding leisure, Colliers believes that recovery will likely be anchored by domestic tourism, with the Department of Tourism (DoT) expecting domestic trips to reach 84.8 million in 2022 or 90% of the total number of domestic trips in 2019.
“Colliers is optimistic that revenge travel among local travelers should help increase hotel occupancies of selected hotels across the country,” the report added. “Meanwhile, the DoT projects foreign arrivals reaching between 2 million to 5 million by 2022.”
JLL’s Mr. de los Reyes, meanwhile, observed heightened hotel occupancy (87.9% in Q4 2021, the firm’s highest recorded rate during the pandemic) amid the holiday season due to lower COVID-19 cases, relaxed restrictions, and pent-up leisure demand. In terms of facility types, quarantine facilities continue to lead the way at 92.8%, followed by multi-use hotels (servicing quarantine and non-quarantine guests) at 85.6%, and leisure hotels at 79.4%.
Logistics and industrial
For the industrial segment, Colliers believes its growth beyond 2021 will likely be driven by sustained demand in e-commerce, logistics and manufacturing across the country.
Also highlighted by Colliers is the rising demand for cold storage facilities projected to sustain demand for industrial assets in the next 12 to 36 months, citing Board of Investments’ projection that the revenue of the country’s cold chain industry will reach P20 billion by 2023.
“As the government accelerates its COVID inoculation program, cold storage facilities are likely to expand in areas outside Metro Manila, anchored by the growth of grocery and perishable food item deliveries,” the firm wrote in the outlook.
JLL shares the same post-pandemic projection. “Vaccines are a topical subject to the moment, but this also includes goods that require temperature control such as groceries like fruits and vegetables, meat and dairy, or miscellaneous products like wine and tobacco,” said Charlie McNaught, the firm’s APAC director for logistics and industrial.