The Philippine real estate sector is seen rebounding due to key factors.
Real estate boom in retail sector
Real estate services company Santos Knight Frank (SKF) said recently that the Philippines’ commercial real estate sector is experiencing a rebound especially in the retail sector where vacancy has fallen to 4.6% in Q2.
According to SKF, the rate is close to the pre-pandemic level of 3.6% recorded in Metro Manila in Q4 2019.
Factors in real estate rebound
SKF chairman and CEO Rick Santos told reporters the loosening of travel restrictions, pent-up demand for consumption, high vaccination rates, and the return to office (RTO) contributed to the recovery in brick-and-mortar retail, a sector that was severely hit during the height of pandemic lockdowns.
He added that a lot of consumers also reported a higher level of confidence in Q2 manifested by the revenge shopping mode and better outlook for the rest of the year – despite inflation – according to the latest survey by the Bangko Sentral ng Pilipinas.
Food and beverage and clothing apparel account for 32.7% and 32.1%, respectively, of all upcoming stores in Metro Manila’s retail sector. Meanwhile, the average retail lease rate of P 1,567 remains only 4.4% lower than in Q4 2019.
Bullish on the Marcos administration
Santos said SKF is keeping a bullish attitude in the country’s property by predicting a significant recovery in the next two to three years into the administration of President Ferdinand Romualdez Marcos, Jr., as demand returns on both commercial and residential property.
“I think it’s obviously we’re big supporters of the Philippine government and President Marcos and what they’re doing and we applaud their efforts across the sector’s and we compliment him on his really working with our global partners and really the with his kind of open door policy to foreign investors and also to the resurgence of his work with multinationals,” Santos said.
POGOs
As far as the banning of the Philippine offshore gaming operations (POGOs) are concerned by President Marcos Santos said this is considered as another challenge just like the COVID-19 pandemic which they manage to hurdle.
“And the economies have emerged, robust and continue to thrive across sectors. So the BPO sector continues to thrive. And we continue to draw it to drive into the post COVID era,” he said.
Santos said there is also a shared optimism in the office market, although a number of themes are driving transactions.
“Firstly, as Western companies continue to cut costs, more outsourcing can be expected to come to the Philippines, spurring office demand for the rest of the year,” Santos said,
“Secondly, PEZA-registered companies may need more office space in order to comply with Fiscal Incentives Review Board requirements. PEZA companies that are currently operating under 70% work-from-office rules may need to prepare for 90% work-from-office by September, which may in turn require them to lease more office space,” Santos added.
More employees returning to the office
Just like, India, Singapore, South Korea, and the majority of Asia, Santos said the Philippines is likely to expect a bigger rate of return to office (RTO) for employees than the rate in developed Western economies. RTO in the Philippines is a result of both the office culture and the needs of its BPO occupiers.
“Q2 was the first quarter for many employees to return to the office. With that, we also saw an increase in leasing activity for the first time in a while. However, with 228,500 sqm of new office space also added to the market in Q2, the Metro Manila vacancy rate still rose to 23%,” explained Morgan McGilvray, SKF Senior Director, Occupier Strategy & Solutions.
The weighted average lease rate grew by a modest 0.7% in Q2 to P 1,089 from P 1,082 quartering Q1.
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