THOUGH still confronted by the coronavirus disease 2019 (Covid-19) pandemic, the Philippines’s real-estate industry is expected to slightly recover this year as demand begins to improve in key sectors, such as industrial & logistics, office, and residential, according to Santos Knight Frank (SKF).
“2020 was a challenging year for Philippine real estate and the global property market, but we see the new year as a promising time for real-estate sectors such as industrial & logistics, office, residential, REITs, and data centers, among others,” SKF Chairman and Chief Executive Officer (CEO) Rick Santos told reporters during their recent webinar. “In general, we expect to see a soft rebound in the real-estate market as the economy gradually recovers.”
He noted that macrotrends like the e-commerce growth, flexible office setups, and constant decentralization outside Metro Manila will continue this year and help the property sector to bounce back again from the ensuing health crisis.
The top executive added that the local market’s demographics remain pivotal in driving the real-estate industry’s long-term performance. He said: “The country’s growing population will drive consumption, online retail, and the industrial & logistics sector, while its young pool of talent will help retain the Philippines’s place in the global BPO industry as outsourcing increases overall.”
Office
COMPARED to 2020, the office segment is generally seen better this year. SKF, however, emphasized that it’s impossible that it will immediately go back to its same level before Covid-19 hit globally, including the Philippines, early last year.
Citing their Real Estate Outlook 2021 report, SKF Senior Director for Occupier Services and Commercial Agency Morgan McGilvray bared that the office vacancy rate in Metro Manila has increased to 9.8 percent in 2020 from the historical levels between nearly 2 percent to around 5 percent since 2011, while asking lease rates have grown by only 1.7 percent a year ago.
This could be attributed to the rise of the so-called work from home setup adopted by occupiers due to national government’s imposition of community quarantines that led to the restriction or closure of most industries and businesses at the height of the pandemic.
As the economy has reopened, however, the office sector may see a gradual return by tenants to the physical workplace this year.
While local firms will be hit the hardest as some of them are likely to downsize, SKF expects multinational occupiers, especially business-process outsourcing (BPO) companies, to resume looking for new locations to expand and meet their office rightsizing requirements.
“BPO is a dominant player,” McGilvray said. “[It’s] net leasing growth in cities outside Metro Manila is estimated at 20,000 sq m to 40,000 sq m.”
For this year, per the SKF study, the outlook is generally moderate but with a few bight spots. It is estimated that about 1.2 million sq m of office space will add to the Metro’s 2021 inventory. Vacancy rates are projected to go up as supply will exceed demand. What’s more, rental fees will flatten out.
With high vacancy and modest asking lease rates, the availability of a bigger amount of fitted space and prime office space, which were once difficult to secure, is seen as an opportunity for companies aiming for better locations, said Santos.
Residential
SLOW but steady rebound is the general prospect ahead of the real-estate sector this year, according to SKF Associate Director and Head for Residential Services Kim Sanchez.
With the sector leaning in favor of the homeseekers, she said that more opportunities are waiting for residential buyers, such as “better deals in terms of price and payment terms.”
Sanchez cited, for instance, that developers and landlords offer flexible payment schemes to spur demand. In terms of financing, she added that more competitive interest rates from the banks will also encourage homebuying from the market.
For Santos, demand will keep on expanding in some low-density areas outside the metropolis, driven by the high-end market preferring to live in wide, open and green spaces.
“Beach homes, vacation homes in specific areas continue to attract the high-net worth market,” he pointed out.
“There will likely be an increase of listings in the resale market,” Sanchez added.
Industrial & logistics
THE retail industry’s loss due to the pandemic is the industrial and logistics sector’s gain. This holds true as the latter was the most stable asset class last year.
Demand in this space, per SKF Director for Investment and Capital Markets Kash Salvador, was bolstered by e-commerce activities.
Citing the Global Web research, he revealed that Metro Manila accounted for 38 percent of e-commerce activities last year, followed by Cavite and Laguna at 9 percent, Cebu at 6 percent, Pampanga and Bulacan at 6 percent, Davao at 3 percent, Rizal at 3 percent, Iloilo at 2 percent, and Batangas at 2 percent.
Bullish prospects continue for the online retail in the country as it is expected to grow by 26 percent this year, according to him.
Apart from e-commerce, the rise of the industrial and logistics sector could be ascribed to previous commercial and retail spaces that have been repurposed and converted to storage and warehousing facilities, noted Santos.
“Cold storage facilities, warehouses, and distribution centers will be in demand this year, especially with the rollout of the vaccine and growth of e-commerce,” said the chairman and CEO of SKF. “Data centers present a long-term opportunity for the sector.”
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Article and Photo originally posted by Business Mirror last February 24, 2021 and written by Roderick Abad.
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