CONSULTANCY Lobien Realty Group (LRG) remains optimistic of the future of the real estate industry despite the new coronavirus disease 2019 (COVID-19) pandemic.
While LRG acknowledges the COVID-19 pandemic has caused a considerable impact on the real estate market, it expects the industry will recover in due time.
MM office market
COVID-19 has slowed down the office market considerably, especially in Metro Manila, LRG said.
According to LRG, available supply and rental rates in Metro Manila have gone up with total office supply growing by 900,000 square meters (sq.m.) this year.
Average rents have risen 9 percent from P1,060 per sq.m. to P1,160 per sq.m.
As of March, 350,000 sq.m. of the 900,000 sq.m. have been leased out by different business industries.
Sheila Lobien, chief executive officer of LRG, said the expansion of Philippine offshore gaming operation (POGO) is put on hold even as operators resume operations.
“As of today, POGOs are not talking about expansion yet and they are cautious. Their operations have not resumed 100 percent. In addition, the travel ban is still in effect and POGOs cannot hire Chinese (citizens), Lobien said.
If at all, Lobien sees growth to kick in by the second half of the year.
LRG projects POGO office demand will be 200,000 sq.m. less than expected and its contribution will slip by $0.8 billion (or around 0.2 percent of GDP).
LRG said business process outsourcing (BPO), which was also severely hit by the slowdown, may soon scout for alternative business locations in the emerging provincial hubs which offer more competitive rental rates and lower labor costs and have become sites of new government infrastructure projects.
Traditional offices, on the other hand, may also seriously consider work from home arrangements that can possibly lower their overhead cost.
LRG, however, predicts that there could be an improved demand for office space by 2021 at a minimum of 700,000 sq.m. across Metro Manila, provided the COVID-19 outbreak will be contained by the second half of the year.
LRG said demand for office space will be revived towards the latter part of the year once existing and new POGO companies, as well as BPO companies, continue their growth all over the country. LRG added there may even be a stronger demand from the BPO sector as a result of global companies’ need to outsource their businesses while their countries battle the destructive effects of the coronavirus.
Provincial office market
LRG said in the provincial office market, vacancy is now at 15 percent.
A total of 257,000 sq.m. of new office space is set to be available in the provincial market this year.
As of March, 36,000 sq.m. has been leased out by different business industries. The average rental rate for provincial business hubs is at P606 per sq.m., more affordable than Metro Manila.
In the residential market, LRG said a total of 15,500 units are expected to be added in the residential supply of Metro Manila this year.
Takeup will likely soften due to international travel restrictions which affect both local and foreign investors. Majority of condominium units being constructed are geared towards the mid-end market (those in the price range of P6 million to P9 millon).
According to LRG, prices in the secondary market are expected to decrease from its market value. Price appreciation will remain inactive depending on how the market will stabilize from the enhanced community quarantine (ECQ).
LRG sees prices of new and upcoming residential properties to remain at pre-ECQ levels.
There is an opportunity for the secondary market to grow as less affluent property owners dispose their assets for liquidity.
The retail industry which was the most affected sector by the ECQ in Luzon will bounce back.
LRG said electronic commerce will drive the consumer and retail industry for the majority of the year. However, shopping malls will gradually recover after the ECQ with more stringent measures on mall sanitation, mall personnel and patron’s hygiene and social distancing in place.
The hotel sector immediately felt the effect of the ECQ.
LRG said occupancy rates of Metro Manila hotels dropped to 35 percent from 74 percent as of the third quarter of 2019.
LRG predicts, however, that post COVID-19, the tourism and hospitality industry will be revitalized but will most likely be governed by new regulations in terms of allowable capacity or number of guests for every given period.
Top-quality sanitation procedures will place a premium on an establishment and will be one of the critical selection factors of customers.