Philippine real estate market: what to watch in 2022

Many companies aim to implement return-to-work plans at the start of the second quarter.

Many companies aim to implement return-to-work plans at the start of the second quarter.

The Philippines has had a poor start to 2022 amid the spike in daily positive cases of COVID-19 due to the Omicron strain. But as soon as infection rates entered a sustained plateau and decline trend, the government eased restrictions to usher in a seemingly closer return to pre-pandemic normality.

Back to the office

Despite the delay, many companies are aiming to implement return-to-work plans early in the second quarter. Stalled negotiations are reignited as the occupiers attempt to secure favorable long-term terms before the tide turns completely in the owners’ favour.

Average occupancy rates are estimated to be in the mid-teens as incoming office supply in Metro Manila this year is expected to reach 0.78 million sq.m. The new wave of expansion plans from information technology and business processing management (IT-BPM) companies will fuel the recovery and growth in rental rates towards the end of 2022.

With the full resumption of activities, take-up rates for condominium complexes should gradually recover in the medium term.

While work-from-home arrangements are seen to be dwindling in number, the long-term view is that the hybrid work setup will persist due to pandemic-induced anxiety and heavy investment related to home purchases outside of Metro Manila. Future offerings should take into account the imminent shift in demand to residential developments in urban centers such as Metro Manila, which will adequately address future pandemic concerns.

Gradual recovery

While growth in consumer activity temporarily slowed at the height of Omicron’s push, footfall at mall developments and occupancy at strategically located hotel developments have gradually recovered, although still below pre-pandemic levels.

As average shopping mall vacancy rates in Metro Manila reached around 15% at the start of 2022, some unused space in retail developments near high-quality infrastructure has been converted into solutions. warehousing to meet last mile delivery commitments due to the growth of e-commerce activity.

The resulting boom in e-commerce has driven demand for warehousing, logistics and supply chain solutions. Recent global events such as the unsynchronized opening of key port destinations and oil price volatility exacerbated by the ongoing conflict between Russia and Ukraine are likely to strain the continued growth of manufacturing and logistics industries. .

Cordero

Cordero

Paradigm shift

To be competitive in the now normal situation, some of the industry’s basic operational and strategic assumptions need to be seriously rethought. Stakeholders in the Philippine real estate sector need to embrace a paradigm shift to capture emerging growth trends amid the various headwinds that have so far defined the start of 2022.

Recent amendments to foreign investment and retail trade liberalization laws come at a good time to support the government’s efforts to stimulate economic growth by relaxing requirements and limitations to accommodate the participation of foreign investors whose need is growing. cruelly felt.

Additionally, global investors are increasingly emphasizing ESG (Environment-Social-Governance) factors as part of their analysis and due diligence process.

As national elections approach, the new group of leaders should prioritize fiscal programs that will maximize the potential of the young workforce while steering the country towards further digitalization.

The new administration should prioritize legislation that will help protect the economy from future pandemic events to ensure uninterrupted growth of the Philippine real estate market.

Claro dG. Cordero Jr is Director of Research, Advisory and Advisory Services at Cushman & Wakefield

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