The sharp spike in COVID-19 cases that has led to the return to ECQ in Metro Manila, Bulacan, Rizal, Laguna and Cavite, may affect economic growth projections for 2021. This is the sentiment of Lobien Realty Group which recently cited forecasts made by the Asian Development bank that the country’s GDP will reach 6.5% in 2021; and that of US-based credit rating agency S&P Global that the Philippines may emerge as one of the fastest growing economies in the region over the next two years and may even post the biggest GDP growth in the region in 2022.
With the extended ECQ, LRG says more challenges await Metro Manila’s real estate markets. However, these problems do not have to be taken sitting down as property owners and landlords can adapt, adjust and, even, evolve to stay afloat.
The Office Property Market
LRG has observed that more companies and investors are gradually going back to the market again to scout for potential office expansion sites or investment opportunities since the start of the year. Although many of the inquiries which LRG has received are still in the initial stages of sourcing and planning, it fully expects that these clients will be ready to commit to potential sites and investment options within the 2nd quarter of the year. LRG also expects that once the rollout of the Covid-19 vaccines comes into fruition, more of their clients will follow suit.
With regard to the government’s call for more employers to adopt a work from home arrangement, LRG says that it will definitely affect office take-up in the long run and adds that this kind of setup may not be sustainable especially for those that don’t have good internet access and connectivity and for those living in poor workplace environments.
LRG believes that at this time landlords/building owners need to be more flexible in their commercial terms when accepting new tenants. Some are already more open in signing short term leases compared to the usual three-to-five-year leases that landlords require according to LRG. With the current situation, LRG advises landlords/building owners to lower rental rates so they can lease their spaces quickly rather than let units remain unoccupied for many months.
The Residential Property Market
LRG has observed that since the pandemic, there has been a change in the priorities of home buyers. More and more home buyers have given importance to settling in less congested areas with more open spaces and greener surroundings. As proof LRG refers to the latest Residential Real Estate Price Index (RREPI) of the Bangko Sentral ng Pilipinas which reports a 0.8% year on year growth in house prices for 2020. The BSP has attributed this largely to the increase in prices of all types of housing units in areas outside the National Capital Region (AONCR) which grew by 5.9% year-on-year. LRG projects that the move to nearby provinces will grow further due to the numerous township projects which are currently being developed as well as the completion of road infrastructure projects that are making travel to these locations easier and shorter.
The condominium sector has been the most affected housing sector since the pandemic with prices decreasing by 8.4% within the last quarter of 2020. LRG has noticed that condo dwellers are transferring to single detached houses as they prioritize their need for more open and greener space. LRG projects
that preference for less congested living areas may continue until herd immunity against the COVID-19 virus is achieved through vaccination. LRG suggests that landlords of this type of property should consider offering lower rents especially if their units have already been vacant for extended periods. Aside from offering discounted rents, they should also highlight features of their building’s property management and how it is mitigating potential causes of Covid-19 infections in the property (e.g., strict monitoring of tenants and their guests, contact tracing measures and the extensiveness of its sanitation procedures). Condo landlords may also consider throwing in leasing incentives such as offering complimentary unit disinfection services and the like to attract tenants.
As to when the new ECQ will end–and to what degree the economy will re-open will depend on the COVID-19 situation in the coming days. The good news however is that in spite of the recent surge in COVID-19 cases, the government has continued its Build Build Build program, has begun the vaccine rollout, and has shown a genuine desire to come up with a necessary balance between health and economic concerns. As a complement, the private sector, though cautious, is ready and raring to reinvest. And the biggest reason to be optimistic about the country’s economic future is the undeniable fact that Filipinos are eager to go back to work and having experienced the difficulty of being unemployed for more or less a year, most Filipinos will have a better appreciation for having jobs and will do better to keep their jobs.
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