Future-proofing real estate
A crisis would somehow always point to a new normal.
It can be something as marginal as a tweak in the processes, an addition of a component or a slight improvement in the way things are carried out. Then again, it can also be as extensive and massive as an overhaul of a system with sweeping reforms meant to significantly enhance lives, business operations, economies or countries in general.
And this COVID-19 pandemic will, for sure, be no different. However, the extent of these changes that should result in the new normal has yet to be determined as the world continues to grapple with the devastating impact of this global health threat on economies and industries.
In the Philippines, industries like real estate are closely monitoring this pandemic and the ensuing new normal as it may potentially reshape market demand and likely affect how future projects will be developed. Top ranking industry executives and experts weighed in on the possibilities of this new normal and how property developers could future-proof their respective developments during a recent webinar hosted by the Philippine Daily Inquirer, in collaboration with Inquirer.net, Colliers International Philippines, Shoppertainment, Icon Executive Search and Wong+Bernstein Advisory.
The online forum, which was held on May 4, had sought to identify what the new normal, if at all, could possibly be in a post-COVID-19 era. Here are a few excerpts from last Monday’s discussion.
Defining ‘new normal’
Joel Luna, a registered architect, environmental planner and a certified Berde professional, opined that what people are referring to as the “new normal” is not likely to be an instantaneous event. It should be worth noting that prior to COVID-19, the economy and real estate sector had over 10 years of rapid growth and when COVID-19 came, market contractions happened and demand for many products dried up. But not all of the products within the real estate sector contracted at the same time, there were some that survived.
“One possibility, upon lifting of the ECQ and into the near term, is that we will probably see a gradual and cautious behavior—no new project launches, moves will be more opportunistic, and developers will be trying to build up liquidity and minimizing risks. Both consumers and developers may go for less risky and less capital intensive ventures. There would be some who would try to retrofit their products, try to repackage them so that they can release some of these inventories in the marketplace. There will be some economic activity in the near term but it won’t be at the level we experienced a year ago. So what you’ll probably see is more of a tempered activity,” Luna explained.
On the design side, attention will be paid to social distancing measures in public spaces, a review of material and building specifications since there will be concerns about safety, and a review of procedures on the property management side, according to Luna. On the policy side meanwhile, this will be a period of review and calibration and of setting new standards. The Philippine real estate industry, as a whole, might also see a coalescence of new market preferences that may result in actual new products, strategic offerings that may dictate the shape and form of new shopping centers, hotels, office spaces, of manufacturing places and residential condominiums.
“It’s interesting to recall that some new products actually emerge from a crisis, like after the global financial crisis in 2008, we saw a surge of affordable condos in the CBDs. There are many other factors that led to that but what you can see is that there’s a lot of innovation that happens precisely because the crisis necessitated it… So the question would be for us is, what would be the types of products we will see or will evolve out of the market transformation that is likely to happen,” Luna added.
Townships, estates and mixed-use communities have gained popularity even before COVID-19 but their value was further highlighted during the ECQ. The kind of convenience provided by these communities is no longer a luxury but an imposed necessity that future homebuyers are expected to demand from property developers.
Thomas F. Mirasol, president and COO of Federal Land Inc., agrees that nowadays, more “prevalent is that we have the integrated mixed use community… (which) is proving to be a great strength in a situation like this. It is so convenient to be able to live right where you work, to be able to have a short walk over to the grocery store or the pharmacy.”
“We have two developments in particular which are sort of great examples of this: Marco Polo in Cebu and Grand Hyatt in BGC. Having integrated hotels into your development means that for example, our residents at the Grand Hyatt, if you’re not able to do your grocery shopping, you can call up the hotel and you got room service delivered to your apartment just the way you want it. Having all of these accessory uses that help make your living, business and shopping experiences much more convenient, safer, comfortable and more reliable is really proving its worth in a situation like this,” Mirasol explained.
Luna pointed out that the current crisis underscored the need for resiliency in general, and diversity of activity is one way to address resiliency. Homogenous developments tend to be less resilient so bringing different uses closer to each other and expanding what is often cited as live-work-play—to include health, learning, food production maybe, small scale manufacturing, recreation, open space—can make a community as diverse as possible.
Amado P. de Jesus Jr., incumbent vice chair of the Philippine Green Building Initiative (PGBI), added that future proofing in this crisis points to resilience, self reliance and self economy. It’s also time, he said, to go back that many has taken for granted–basic, which means taking care of and ensuring that buildings and communities are healthy.
Impact of COVID-19 on prices
Jose R. Soberano III, chairman, president and chief executive officer of Cebu Landmasters Inc., believes that due to the COVID-19, prices will be “a bit soft but it’s going to be temporary. Even right now, the dips we’re noticing or experiencing are not really that significant. And one thing going for us developers is that price is only as good as what your cost is, that’s why we’re seeing a lot of interesting opportunities.”
Soberano further pointed out that homes are real necessities, which meant there is a real demand, considering the huge backlog in some segments. There’s a lot of optimism now, he added, that will be a lot of easing up and that “we’ll be going back gradually and ultimately, we will come together and we will overcome this.”
Mirasol, for his part, noted that the reactions of developers will depend on two things: strength of the balance sheet, which will dictate if one is financially strong enough to weather this temporary crisis, and the strength of a product which could still see a strong demand if it’s superior.
“In light of a situation like this, the probability that demand will go down is probably small. If you’re fortunate enough as developer to be in a situation where you have both a strong balance sheet and a strong product, I don’t think you’re going to see a lot of price offering,” he added. Moving forward however, Mirasol pointed out that the market is expected to demand three basic things from all developers: an emphasis on healthier buildings, bigger spaces, and property management.
The webinar hosted by Inquirer Property last May 4 was supported by Ortigas Land, Megaworld Corp., Medicard Philippines, Suntrust Properties Inc. and Cebu Landmasters Inc. You can view the webinar on the Facebook page of Inquirer.net (https://www.facebook.com/inquirerdotnet/videos/223490568953294/)
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