PROSPECTS on the country’s real estate industry is upbeat this year on the back of improved market conditions and performances across property segments, according to a top executive of a diversified professional services and investment management company.
“The Philippine real estate sector is expected to finish 2022 strong, an optimism that is expected to persist through 2023 as recovery prospects are boosted by strong macroeconomic fundamentals,” said Joey Roi Bondoc, associate director for research at Colliers Philippines.
He attributed the positive forecast for this year to enhanced office transactions, higher condominium supply and demand in Metro Manila, increased mall traffic, and better hotel occupancies and average daily rates (ADRs).
Room for expansion
BASED on Collier’s latest Philippine Property Outlook report, a positive net take-up for the office sector is seen by the end of 2022, with absorption reaching 140,000 square meters (sq m), a turnaround from the recorded—181,300 sq m and—273,100 sq m in 2020 and 2021, respectively.
Titled “Aiming for a strong finish: Philippine property recovery spills over into 2023”, the study shows a continued uptrend next year, with commitments on 338,600 sq m of office space, mostly from information technology-business process management firms and traditional corporate occupiers (companies in various sectors such as legal, engineering and construction, government agencies, and flexible workspace operators).
Because of muted pre-leasing in upcoming buildings, office vacancy rate forecast for this year is adjusted from 18.2 percent to 19.5 percent. It is projected to go up even further—around 20.5 percent—in the next 12 months with the delivery of 603,900 sq m of new supply.
As more offices in Metro Manila will remain unoccupied amid a glut in supply, rents are likely to drop by another 10 percent in 2022 before bottoming out in 2023. The company is beginning to see a stabilized leasing in submarkets with declining vacancies such as Fort Bonifacio and Makati central business districts (CBDs). Meanwhile, submarkets with significant amount of new inventory and low take-up will see a further decrease in rents in the coming year.
“In our view, office developers should take advantage of a rebound in leasing within and outside Metro Manila by constructing new office towers and offering more flexible workspaces,” Bondoc recommended.
Home is where the growth is
GOOD business will be sustained in three consecutive years for the residential sector as Colliers sees an average completion of 8,100 units annually from 2022 to 2024, from the 7,800 units finished yearly from 2019 to 2021. In 2023 alone, 5,600 new condominium units are set to be delivered, about two-thirds of which will be in the Bay Area.
The following year, condominium stock in major business districts in the National Capital Region (NCR) will reach 166,400 units, a 17-percent hike from 142,200 units in 2021. The bulk of which will coming again from the Bay Area as it will likely overtake Fort Bonifacio as the biggest condominium market in the metropolis in 2024, with 44,100 units or 27 percent of stock during the period.
Vacancy-wise, the firm expects a slight drop in the secondary market from 17.6 percent in 2022 to 17.1 percent next year. Expatriates and local employees wanting to stay in condominium units near their workplaces will augur well to a strong demand for residential projects for lease.
“As the Metro Manila pre-selling condominium market recovers, we urge real estate developers to integrate sustainable and green features into their projects, as well as highlight amenities such as open spaces and green areas,” the associate director for research said, referring to these factors as top concerns of housing unit buyers per Collier’s Third Quarter 2022 Residential Survey.
Revenge buying: Boon for retail
WITH the easing mobility restrictions due to the improving pandemic situation in the country, mallgoers have begun to frequent again the retail establishments.
In fact, major mall developers have been reporting that foot traffic reached between 85 percent to 95 percent of pre-Covid levels in the third quarter of this year, from only 40 percent the previous year. The domestic retail market saw several imported brands that opened shop across NCR malls in 2022.
The company sees more foreign and local retailers to be taking up the 448,900 sq m of new physical mall space in 2023 to take advantage of rising traffic and anticipated strong purchasing power of consumers. Nevertheless, vacancy will grow from 16 percent this year to 17 percent over the next 12 months. Meanwhile, rents are seen to bounce back following a better retail space absorption and mall consumer traffic.
Given the improved conditions in the retail scene, Colliers suggests that mall operators reactivate their event spaces or activity centers by organizing events such as trade fairs, exhibits and concerts to attract more mallgoers. Food and beverage, as well as clothing and footwear retailers should also consider opening pop-up stores, especially those testing the feasibility of the local retail market. The firm also encourages mall operators and retailers to keep on implementing regular sanitation and other health and safety protocols amid the ensuing health crisis, especially in high-density retail spaces.
Industrialization to bolster take up in ecozones
ENCOURAGING manufacturing activities in the country that will help generate job opportunities for Filipinos was among the political agenda pushed by President Ferdinand “Bongbong” Marcos Jr. during his candidacy.
“The industrial sector is expected to benefit from the new administration’s push for industrialization,” Bondoc said.
Colliers believes that enhancing the competitiveness of the country’s manufacturing industry should lead to greater inflow of investments and these should benefit industrial parks, especially those located in northern and central Luzon.
Approximately 112 hectares of industrial supply are projected to become available in the CALABA (Calamba-Laguna-Batangas) corridor. Such ample space is expected to be taken up by expanding manufacturing and logistics firms in these areas. This trend will continue as 210 hectares of new industrial space are scheduled to be delivered from 2023 to 2024, particularly in Tarlac and Subic.
Robust accommodation
THE relaxation of Covid-19 measures, including the optional mask removal, has also lured more visitors to the country. This, in turn, has somehow brought a relief to the hotel industry being one of the sectors highly affected by the pandemic.
Data from the Department of Tourism show that foreign arrivals as of November 14, 2022, reached 2 million, surpassing already the full-year target of 1.7 million. As of June of this year, hotel occupancies in Metro Manila have already gone up to 47 percent from 44 percent in the second half of 2021—thanks largely to the return of business travel and resumption of MICE (Meetings, Incentives, Conferences, and Exhibitions) activities.
The firm sees a completion of a record-high 3,900 rooms next year as developers anticipate the imminent recovery in global travel. From 2023 to 2025, it expects the annual delivery of 2,120 rooms, higher than the 720 rooms completed yearly from 2020 to 2022.
“Colliers sees the opening of more foreign-branded hotels, while the spike in local and foreign tourists will likely result in improved occupancies and ADRs,” Bondoc said, while citing that about 44 percent of the new supply are multinationals and are likely to open in the Bay Area, Makati and Ortigas.