Manila—Investment management firm Colliers recently forecasted the recovery of the Philippine real estate sector in 2022 on the back of improving vaccination rates, complemented by rising consumer and business confidence and government-projected economic recovery.
In its property market outlook report for 2022, Joey Roi Bondoc, Colliers associate director and head of research, predicted that the office, residential, retail, and industrial sectors will benefit from a macroeconomic rebound.
“Landlords should prepare to capture pent-up demand while tenants and investors should maximize opportunities as the market is on its way to recovery,” he advised.
In the first nine months of 2021, Colliers recorded 302,600 square meters of office deals, up a decent 2% from the 295,800 square meters recorded in the same period in 2020.
Traditional occupiers (or non–business process outsourcing firms) covered 61% of the total transactions from January to September of this year.
Colliers retained its vacancy forecast of 15.6% by the end of 2021. Improvement in business sentiment in the next 12 months complemented by greater vaccination rates, will likely lead to potential rebound in office space absorption in 2022, the report said.
Future-proofing
Colliers also predicted that the adoption of sustainable office spaces will play a crucial role in future-proofing office towers beyond 2022.
“There will likely be a heightened preference for sustainable buildings that provide natural lighting and optimize air quality, among other features,” the report noted. “Over the next 3 to 5 years, these features should result in utility and talent acquisition cost savings and contribute to healthier and more productive workforce.”
Rise in the north
The completion of major infrastructure projects, such as the NLEX–SLEX Connector, North–South Commuter Railway, and the Central Luzon Link Expressway, will likely benefit key provinces in Northern-Central Luzon, including Pampanga and Bulacan. These projects will be complemented by the completion of the New Manila International Airport (or Bulacan International Airport) and the expansion of Clark International Airport. Aside from improving connectivity, these infrastructure projects should also raise land values outside the capital region.
Revenge shopping, dining to spur recovery
Colliers observed that developers have been cautious in completing new malls and this was evident in 2020 when only 53,100 square meters of new space was completed. This is significantly lower than the annual average of about 323,200 square meters of new retail space from 2017 to 2019.
For 2022, Colliers forecasts vacancy in the retail sector rising to about 17%, partially due to the substantial new supply of about 523,700 square meters likely to be delivered and tepid demand because of the changeable lockdown situation in Metro Manila.
Although the Department of Trade and Industry (DTI) has reported that malls and restaurants are already recording consumer traffic of between 50% and 80% of pre-Covid-19 levels following the easing of quarantine restrictions since November 2021, Filipinos’ growing propensity to shop online remains an important factor that will likely influence physical mall space absorption beyond 2022.
In the first 9 months of 2021, retail rents dropped by 5%, from a 10% decline in the same period in 2020. Colliers expects rents to recover slowly starting 2022 with an improved vaccination program, and a government-projected economic recovery spurring an increase in consumer spending.
Local tourism to stoke demand
Colliers believes that recovery in the leisure sector will likely be anchored by domestic tourism. The Department of Tourism (DOT) is expecting domestic trips to reach 84.8 million in 2022 or 90% of the total number of domestic trips in 2019. Revenge travel among local travelers should also help increase occupancies of selected hotels across the country.
In 2021, about 1,027 hotel rooms are likely to be delivered, with the Bay Area accounting for about 81% of the new supply. The delivery of new hotel rooms is likely to remain tepid up to 2022 before gradually rebounding in 2023.
E-commerce to sustain demand for industrial
Colliers believes that the growth of industrial sector beyond 2021 will likely be driven by sustained demand in e-commerce, logistics, and manufacturing across the country.
The rising demand for cold storage facilities will sustain demand for industrial assets in the next 12 to 36 months. To meet the growing demand, Colliers encourages developers to consider expanding their industrial portfolio to include cold chain facilities or refurbish existing supply by incorporating specialized cold storage features such as pre-installed chillers, increased floor load capacity, and higher ceiling heights.