The recovery outlooks for the Philippine property market are becoming clearer two years after the worldwide health crisis triggered by the coronavirus disease 2019 (COVID-19) turned out to be a global economic disaster as well. The Philippine property market is "raring to roar back" this year, according to a report released by professional real estate services firm Colliers Philippines in December, with an increasing vaccination rate and increased consumer and corporate confidence delivering a "much-needed lift."
Colliers believes that a macroeconomic recovery will assist the office, residential, retail, and industrial sectors. In their outlook, they share that landlords should plan to exploit pent-up demand, while renters and investors should optimize possibilities when the market recovers. The real estate market, on the other hand, is predicted to proceed with cautious optimism in 2022. While market mood is improving, there are still mixed thoughts about real estate. There should be a new supply or significant supply expansion on office, retail, hospitality, and residential in 2022 to exert pressure on real estate market performance.
Mr. de los Reyes believes that the office market is stabilizing, as seen by numbers from the fourth quarter (Q4) of 2021. There was a moderate take-up of 75,713 sq.m. (square meters) in gross leasing volumes in Q4 2021, and while the number is lower than previous quarters, there is still improved sentiment in the market because compliance concerns, rightsizing, and a halt in vacancy uptick all contributed to Q4 figures.
In the first half of 2022, decreased leasing activity is expected amid this anticipated stable performance. In terms of elections, leasing activity will be slowing in the first half of 2022 as more investors and occupiers put off leasing decisions as they wait to see how regulations change. While firms are still figuring out what their future office spaces will look like, one thing is certain: there is a rising "acceptance of a hybrid work model among occupiers," which means they're willing to have a portion of their workforce work remotely.
Colliers predicts that certain organizations, such as outsourcing companies, would continue to hunt for office space across the country, notwithstanding the deployment of work-from-home agreements. These leasing queries should start materializing over the next 12 months, anchoring a recovery in office space take-up within and outside Metro Manila, and there can also be a potential rebound in office space absorption this year, bolstered by improved business sentiment and higher vaccination rates in the next 12 months.
More landlords and occupiers are expected to embrace "the healthy and sustainable road to office construction and leasing," according to Colliers. Colliers' research stated, "We believe that the adoption of sustainable office spaces plays a critical role in future-proofing office buildings beyond 2022." "In our opinion, there will be a greater preference for sustainable buildings that, among other things, provide natural lighting and improve air quality." These characteristics should result in utility and talent acquisition cost reductions over the next three to five years, as well as a healthier and more productive workforce."
Retail is also showing signs of improvement. Due to retail shop openings taking advantage of the Christmas season, analysts have witnessed a persistent lowering of vacancy levels across Metro Manila. Food and beverage (26.6 percent) and home appliances and furniture (21.5 percent) sectors are now driving store openings, according to the business. Meanwhile, Colliers predicts the completion of 523,700 square meters of new retail space, as well as a rent recovery fueled by rising vaccinations and increased consumer spending.
One of the main variables that will likely affect physical mall space absorption beyond 2022 is the Filipinos' rising proclivity to purchase online. Given this finding, analysts advise shops to grow their e-commerce presence and take use of technical benefits. Meanwhile, mall owners should be flexible with their space utilization by optimizing available space for pop-up retailers and leveraging available amenities such as activity centers for COVID immunization efforts, as well as presenting alternate food alternatives.
Due to reduced limitations and a better return to work rate in Q4, the vacancy rate in residential condominiums has decreased considerably (from 6.8% to 5.1%). The return to work has resulted in a rise in demand from professionals working in business hubs who may have reactivated their leases or are searching for housing near their employment.
In addition, vacancy levels in the midscale category improved (rents increased to P720 per sq.m.), while vacancies in the upscale and luxury segments increased (with rent around P1,015 sq.m.). Meanwhile, Colliers expects major infrastructure projects (such as the NLEx SLEx Connector, the North-South Commuter Railway, and the Central Luzon Link Expressway), which are expected to be completed in the next 12 to 36 months, to boost land values outside the capital region while also improving connectivity. According to the firm's study, "the government's decentralization policy and large public infrastructure projects should motivate developers to build additional master-planned communities outside of Metro Manila."
Hotels and Leisure
In terms of leisure, Colliers believes that domestic tourism will be a key driver of recovery, with the Department of Tourism (DoT) projecting 84.8 million domestic visits in 2022, accounting for 90 percent of all domestic trips in 2019. Colliers is confident that revenge travel among local passengers would help raise hotel occupancies at chosen properties around the country. By 2022, the Department of Transportation expects international arrivals to range from 2 million to 5 million.
Given the reduced COVID-19 cases, relaxed limitations, and pent-up leisure demand led to higher hotel occupancy (87.9% in Q4 2021, the firm's highest recorded rate during the pandemic) over the Christmas season. Quarantine facilities continue to lead the way with 92.8 percent of the market, followed by multi-use hotels (serving both quarantine and non-quarantine customers) at 85.6 percent and leisure hotels at 79.4 percent.
Logistics and Manufacturing
Colliers expects that industrial growth beyond 2021 will be fueled by continued demand in e-commerce, logistics, and manufacturing across the country. Colliers also noted the increased need for cold storage facilities, which is expected to sustain demand for industrial properties in the next 12 to 36 months, citing the Board of Investments' prediction that the country's cold chain industry will generate P20 billion in income by 2023.
As the government accelerates its COVID vaccination program, cold storage facilities outside Metro Manila are projected to increase, underpinned by the rise of grocery and perishable food item delivery. Vaccines are a hot topic right now but this also covers commodities like fruits and vegetables, meat and dairy, or other things like alcohol and tobacco.
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