Metro Manila’s condominium and retail sectors amid COVID-19 | Inquirer Business
Colliers Review

Metro Manila’s condominium and retail sectors amid COVID-19

Last week, I discussed the impact of COVID-19 on Metro Manila office market and how the continued implementation of the government’s “Build, Build, Build” program amid the pandemic could help support the growth of the Philippine property market.

We have been getting a lot of queries about the Metro Manila residential market and how developers and investors have been responding to the disruptions in the domestic market. Apart from this, another interesting property segment to dissect is the retail sector. Which segments are likely to thrive amid the pandemic? When will retail demand recover?

It is not all gloom and doom for the Philippine property sector as there are opportunities amid the uncertainties.

Condominium market: Softer demand in 2020, up for recovery in 2021

Based on Colliers International Philippines’ data, there were only around 1,670 new condominium units delivered in the first three months of the year—the lowest number of completion recorded in the past six quarters.


For this year, Colliers expects a slowdown in completions due to work stoppage following the implementation of the enhanced community quarantine (ECQ) in Luzon. As an example, the work stoppage has pushed back the completion date of a couple of residential towers to the second quarter of 2021, from an earlier target of fourth quarter this year. We now expect the delivery of about 10,900 units for 2020, down from our initial estimate of 14,700 units.


This downward adjustment in new supply should temper the increase in vacancy in the secondary residential market, which covers the completed units.

The work stoppage in March and April is also likely to have a ripple effect on Metro Manila’s residential supply up to 2022. While we see completions picking up in 2021 with 7,900 units, we see the capital region’s stock by the end of 2022 reaching only about 155,730 units, down from our initial forecast of 158,290 units. About two-thirds of new supply from 2020 to 2022 will be in the Bay Area.

Economic recovery, low interest rates to support reboundWhat’s positive about the residential market is that we no longer see the mortgage rates of between 19 and 21 percent that were seen during the Asian financial crisis. Interest rates remain low and a more aggressive reduction in the next few months should help stoke demand in the property market.

This is particularly important especially once market sentiment improves starting the third quarter of 2020 and pent up residential demand starts kicking in by early 2021.

Shift from brick to click

Colliers believes that even with a partial lifting of the ECQ on May 16, most Metro Manila consumers are likely to limit spending to essentials, including groceries, medicines and food and beverage (F&B) for delivery. The continued implementation of social distancing measures by the government is likely to result in a calibrated and gradual opening of retail spaces in the capital region. Given the profile of upcoming retailers in 2020, Colliers estimates that only about 50 percent of new leasable space due to be completed in the next 12 months is likely to be absorbed, raising Metro Manila’s vacancy to 12 percent by the end of 2020 from 10 percent as of end 2019.


Studies citing data from the Asian Development Bank, Bangko Sentral ng Pilipinas and consumer research firms noted that more than 90 percent of remittances received by Filipino households are spent on basic needs such as food, fueling retail consumption.


Some economic analysts have revised downward their remittance forecast for 2020. This is likely to erode consumer purchasing power and confidence. Data from BSP showed that remittances are affected by financial crises. During the Asian financial crisis, remittances dropped to $6 billion in 1999 from $7.4 billion in 1998. During the global economic turmoil, remittance growth slowed to 6 percent in 2009 after a 14 percent hike in 2008.

In our opinion, the recovery of retail demand in 2021 hinges on the pace of expansion of Philippine and global economies.

Economic recovery, low interest rates may support rebound.

Rethinking strategies

Physical malls have felt the immediate pinch brought about by the government’s imposition of an ECQ in Luzon and social distancing measures due to the COVID-19 pandemic.

The ECQ forced malls to close, with only the stores supplying essential items such as groceries, medicines and food for delivery open during the ECQ. Colliers believes social distancing is likely to be part of the new normal. Hence, a significant number of physical retail shops are likely to remain closed for additional time.

However, brick-and-mortar retailers are trying to tap the demand by expanding their online presence. Colliers expects more retailers to create their own e-commerce sites, utilize existing sites of major mall operators, or use popular social media platforms such as Facebook and Instagram.

In our opinion, these expanded online strategies should also target the elderly, who are among the most vulnerable segments of the population during the pandemic but are now actively embracing online shopping.

Social distancing measures have been compelling consumers to rely heavily on deliveries. Mall operators and retailers should consider firming up partnerships with delivery companies that have modernized warehouses and efficient logistics systems to maximize their shift from brick-and-mortar to online selling.

In our opinion, mall operators, retailers, as well as condominium developers should line up their marketing efforts now to recapture demand once market conditions improve. This is particularly important for the condominium market, where we saw demand in the pre-selling market outpacing supply from 2016 to 2019.

Not all gloom and doom

Moody’s Investors Service said real estate is one of the sectors with low exposure to the COVID-19 pandemic. Meanwhile, the BSP has also stated that while the Philippine economy may contract by 0.8 percent this year, economic growth may reach 7.8 percent in 2021.

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It is not all gloom and doom for the Philippine property. There are opportunities amid the uncertainties, similar to what we saw during the past crises. From the bitter experience of the Asian financial crisis in the late 1990s, Philippine developers learned the necessity to turn off the supply tap—and quickly—as they have demonstrated during the global financial crisis in 2008 and 2009. We should be mindful of these opportunities as we navigate through these uncertain times.

TAGS: Colliers International Philippines

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