Emerging out of the disruptions caused by the COVID-19 pandemic, the Philippine property market is likely to resume in 2022 a new bull cycle that could last for at least two decades, property experts from Leechiu Property Consultants (LPC) said.
In the coming year, LPC chief executive officer David Leechiu said office demand would most likely bounce back to 2016 levels or the level prior to the Philippine offshore gaming operator (Pogo)-driven hyper-growth years seen in 2017 to 2019, with the information technology-business process management (IT-BPM) as the single largest demand driver in the next few years.
Leechiu projected that in less than 10 years, tourism could be the third leg of the Philippine economy that could be bigger than either of the first two legs—remittances and IT-BPM. These are in turn seen to fuel the fourth leg—a more robust consumer spending—on the back of improving consumer affluence.
The upswing of the property market started in 2004 and has continued since then despite all the political upheavals, volcanic eruptions, floods, election cycles, coup d’etat attempts, global financial crisis and other challenges, Leechiu said.
“A lot of the country’s [structural] problems have been somewhat fixed, and a lot more problems need to be fixed. But the ones that we did fix in the last 20 years are going to propel us to a path of prosperity and the future. The problems that we will fix will take us through the next 20 years of prosperity,” Leechiu said in a press briefing on Wednesday.
Doubled per capita income
As the country’s per capita income doubled in the last 20 years, he said per capita income would most likely double in less than 20 years.
As of 2020, Philippine per capita income amounted to nearly $3,300.
On Pogos, Leechiu expect the sector to recover in the next three to five months. “Some companies might still be contracting but based on our pipeline that we see, more and more customers in the Pogo sector are asking us for more space, not just in the office space, but more importantly on the residential space, which is a very good sign,” Leechiu said.
With the country’s borders open anew, Leechiu said foreigners could resume populating the country’s residential and office sectors.
In 2021, LPC expects Philippine office demand to exceed 540,000 square meters or at least 39 percent more than the previous year. In the fourth quarter alone, office take-up surged by 74 percent year-on-year to 160,000 square meters.
Vacancy rates
Unrenewed leases in the fourth quarter resulted in a current vacancy rate of 18 percent across Metro Manila, particularly in previous Pogo hotspots in the Manila Bay area (27 percent) and Quezon City (24 percent). Vacancy rates in Makati City and Bonifacio Global City hover at more manageable levels of 12 percent and 13 percent, respectively.
“Despite challenges in the rental market, recovery is shaping up and is well on its way to prepandemic levels. It is to the benefit of the market that the owners of Philippine real estate tend to hold their positions with a longer term view and are therefore not as affected by short short term yield fluctuations,” LPC director for commercial leasing Mikko Barranda said.
Tam Angel, LPC director for investment sales, said that given improving economic conditions and declining COVID-19 numbers, land values across all business districts would likely keep rising in 2022 and even speed up in the next few years, similar to what was seen in 2008-2010 in the aftermath of the global financial crisis. Angel added: “2022 could very well be the first of the bull run years.”