PROPERTY consultant Santos Knight Frank said the Philippine property market is shifting towards a buyers’ market amid a slowdown brought by the new coronavirus pandemic.
“The economic inactivity during the enhanced community quarantine in Luzon and behavioral effects of the pandemic on people’s daily activities will have important implications on property, although impacts will vary per sector,” said Rick Santos, Santos Knight Frank chairman.
Santos Knight Frank said the industrial and logistics sector is seen to be the most resilient given its role in both during and after the enhanced quarantine, supporting the production and delivery of goods to groceries and other operational retail stores.
“Healthcare real estate, specifically hospitals, out-patient clinics, rehabilitation centers, diagnostic centers, and companies with healthcare accounts, will also attract new investment interests as the public becomes more conscious about health and well-being as a result of the pandemic,” it said.
Santos Knight Frank expects 810,000 square meters (sq.m.) of new office supply this year in Metro Manila, down from the initial expectation of 1.18 million sq.m.
It also expects vacancy level this year to reach 10 percent, up from the 5 percent recorded in 2019, in Metro Manila as tenants re-assess their expansion plans.
Santos Knight Frank pegs a full-year Philippine gross domestic product growth of between 0.6 and 4 percent, with office space demand this year not as robust as last year.
Rents are seen to drop 10 percent in the residential segment.
According to Santos, global companies will be looking into outsourcing more to cut costs, “potentially benefitting the Philippines’ BPO (business process outsourcing) industry.”
“While so, expansion of Philippine offshore and gaming operators face uncertainty until flights between China and the Philippines are normalized,” Santos said.
Rent, however, is expected to freeze by the second quarter this year “and may contract at some point,” he added.
Other sectors face uncertainty, such as hospitality and tourism. Recovery of this industry will be seen once people deem traveling to be safe again.
“We’re experiencing a Black Swan event on a global scale that has slowed down the world economy and, with it, the property market. Liquidity, flexibility, and business continuity are of utmost importance for companies to continue running,” said Santos.
Sales in the residential segment is expected to dampen during the initial weeks post-quarantine.
“Vacancy levels for residential leasing may rise and induce lower lease rates,” Santos said, noting this provides an opportunity to purchase residential units at lower discounted price.
“In the Philippines, we expect to see resilience in the industrial and logistics sectors and opportunities in healthcare. Demand for BPO services will be ramped up by global companies which are cutting costs through outsourcing and offshoring. Retail will return once consumers are confident about their safety and wellbeing,” he said.
To manage the effects of the coronavirus disease 2019 (COVID-19), Santos Knight Frank encourages property owners, landlords, developers and tenants to adopt creative strategies.
Santos, however, said people should not forget that at this time, cash remains “king.”
“Real estate is one of the most capital heavy expenditures that businesses incur. Businesses can manage their liquidity by selling non-core assets, seeking overseas funding, and acquiring loans,” he said.
Lessors should also provide a sense of security to tenants and customers.
“Good property and facility management services in residential and commercial buildings have become extremely important as front-line defense against COVID-19. Protecting lives is tantamount to protecting assets,” Santos said.
“In the long run, landlords and developers should consider sustainable and wellness-oriented developments as tenants become more conscious about the impact of real estate into the wellbeing of their employees,” he added.
