Property slump seen to continue

The Philippine property sector is not out of the woods yet as sluggish economic and business conditions continue to jack up office, residential, retail and hotel vacancies, property consulting firm Colliers International Philippines said.

The only segment that has continued to boom amid the prolonged coronavirus pandemic is the industrial segment, driven by rising warehousing and logistics requirements.

Residential vacancy rate in Metro Manila hit an all-time high of 15.6 percent in 2020 and will likely worsen further to 16.9 percent, especially in business districts with substantial stock such as the Bay Area and Bonifacio Global City, Joe Roi Bondoc, associate director at Colliers Philippines, said.

Based on Colliers’ data, residential property prices fell by 13.2 percent in 2020, reversing the 26-percent increase in 2019. Colliers expects a slow recovery of capital values starting 2022, supported by a muted rebound in Metro Manila office leasing.

At the end of 2020, residential rents also declined by 7.8 percent, sharper than the drop during the Global financial crisis of 2008-2009 but more tempered than the decline seen during the Asian financial crisis of 1997 when rents declined by 15.4 percent.

Subdued local demand

“In 2022, we expect prices and rents to increase by about 1.5 percent and 1.7 percent year-on-year, respectively. We expect the pace of growth to hinge on a rebound in local and foreign investor sentiment and a recovery in office space absorption,” Bondoc said.

Office vacancy rates are expected to worsen to 12.5 percent this year—the highest since 2003—from 9.1 percent at the end of last year as Philippine offshore gaming operators continue to exit this market while outsourcing firms rationalize office requirements.

After declining by an average of 17 percent last year, office leasing rates are seen to further drop by 15 percent this year. But the sector is seen to bottom out by the third or fourth quarter of this year, at the earliest, and recover starting 2022, Dom Fredrick Andaya, Colliers director for office services, said.

In the hotel segment, occupancy rates hit only 20 percent in the second half of 2020 from the prepandemic average of 72 percent due to disappointing foreign arrivals and subdued local demand. Colliers expects occupancy to remain at about 30 percent in 2021 as international and domestic tourism is unlikely to recover in the next 12 months.

On the other hand, Colliers is projecting a more active take-up of industrial space this year and in 2022 due to manufacturing and logistics investments, led by firms in the essential goods industry such as food, beverage and pharmaceuticals.

“We expect a healthy demand for the warehousing sector supported by the growth of e-commerce and the emergence of a lockdown economy,” Bondoc said.

“We recommend that developers construct more cold storage facilities as demand in areas such as Metro Manila, Pampanga and the Cavite-Laguna-Batangas corridor remains underserved. We expect demand to be driven by the growth of deliveries of perishable food items and groceries. This will likely be complemented by the government’s anti-COVID-19 vaccination program as some vaccines require cold chain facilities to ensure product quality,” he added.