Policies of the next administration will determine the pace at which property developers will move with their projects, according to Richard Raymundo, Colliers Philippines managing director.
Many developers are now on a wait-and-see stance as they anticipate the policy environment post-election, Colliers said.
“With the next administration, if the China link is still there, maybe the POGOs (Philippine offshore gaming operations) would return, that’s a maybe. Will they continue the Build, Build, Build of the Duterte administration? We have major infrastructure (projects) yet to be finished like the subway system. Are they going to double down on that with other locations? That has a major impact on developments as well, and real estate,” Raymundo said.
Joey Roi Bondoc, Colliers associate director for research, said businessmen seek a stable policy environment and look forward to continued infrastructure push and decentralization outside of Metro Manila.
The enactment of pro-investment measures like the Foreign Investments Act and the Retail Trade Liberalization will also have an impact on property development, Bondoc added.
Colliers is bullish about the retail and office segments of the real estate sector.
According to Bondoc, retail has the greatest potential for rebound as major mall operators note foot traffic in malls is now at 60 to 70 percent of the pre-pandemic level.
“It’s an election year. So there’s consumption expenditure that has an uplift during consumption in an election year,” said Raymundo.
Dom Frederick Andaya, Colliers senior director for officer services, said net take-up in the first quarter of the year is at 26,400 square meters, reversing the 130,100 sq.m. contraction recorded in the fourth quarter last year and the past seven consecutive quarters of decline in net take-up since the first quarter of 2020.
The vacancy rate, however, is up at 17 percent, from the previous quarter’s 15.7 percent, though Andaya said it has stabilized and will continue to improve as companies institute a return to work setup for employees.
“However, because of the still rising vacancy, we’re still expecting rents to decline this year,” he added.
Colliers noted a drop in Metro Manila’s lease rate at an average of 3.1 percent quarter-on-quarter and expects a drop of an average of 5 percent this year before recovering next year.
Maricris Sarino-Joson, Colliers director for office services, said the condominium market will mirror the recovery trend of the office segment, as a big chunk of the market benefits from people who opt to lease living spaces close to work.
Raymundo said new unit launches are tepid amid a slowdown in demand from lessors.
“There’s a lot of people right now with a lot of condos that are vacant. Because the vacancy rate is high and your rental yield is very low, it’s what 3-4 percent, It’s very difficult for them to make a decision to buy more condos at that,” he said.
However, Bondoc said condo launches already returned to a pre-POGO level which at its peak was at 53,000 units a year.
“Similar to what you see in the office, we are unlikely to see significant launches or creation of new office space and new number of condo units, mainly because you have a portion of the demand that — the POGO demand — has been pulled out of the equation. But we’re seeing recovery, meaning the pre-POGO level demand but at least with pre-POGO, where we will be seeing launches of about 30,000-40,000 condo units,” he said.
Colliers said the condo sub-market it monitors has 142,000 units in stocks as of the first quarter, substantially the same as of end-2021, with 10,000 units expected to be added by the end of 2022.
Rents in the condo market declined by 0.2 percent in the first quarter, slower than the 1.6 percent drop recorded in the first quarter of 2021. It is expected to pick up by the second half of the year as office leasing recovers, leading for vacancy to ease to 17.2 percent. – Ruelle Castro
