The Philippine property sector is likely to regain lost ground this 2022 as the country shifts from COVID-19 pandemic to “endemic” management, but it will take more time to return to its prepandemic vibrancy, property consulting firm Colliers said.
“We’re hoping for a V-shaped recovery, but I think it will be a slow, gradual recovery,” Joey Roi Bondoc, Colliers associate director, said in a property briefing on Wednesday.
In the office property segment, Colliers senior director Dom Fredrick Andaya reported that average office lease rates in Metro Manila had dropped by 12.4 percent in 2021, but this was slower than the 17 percent decline in 2020.
Slow recovery
Colliers sees a slow office market recovery starting second half of 2022, supported by sustained office absorption. For the whole of 2021, office property transactions grew by 18 percent to reach 422,000 square meters.
Still, office vacancy reached 15.7 percent in 2021, higher than the 9.1 percent posted in 2020. This year, Andaya said vacancy rate would rise further to 18.9 percent due to muted preleasing activities and the completion of new office supply. But this was likely to peak at around the 19 percent level and start to plateau in 2023.
Andaya said vacancy rates may remain at double-digit levels until 2025, unless new demand from business process outsourcing firms, the Philippine offshore gaming operators and other occupants would grow faster than expected.
And with new office supply coming this year, rental rates are seen to decline by another 10 percent even if the volume of transactions had been rising every quarter.
Residential market
On the residential segment, Colliers reported that rental rates across the secondary market declined in the fourth quarter of 2021 as demand from expatriates and local professionals remained subdued. However, a slight rental rebound is expected by the second half of 2022 as more businesses summon their employees back to their offices.
Residential rental rate in the metropolis is seen to improve by 1.7 percent this year and further by 2.3 percent through 2026.
“The bright spot here is we’re seeing a good take-up in residential house and lots in the horizontal segment. That’s why if you look at all the developers, there was a shift in their launches to horizontal because it seems there was demand for that versus the condos (high-rise or vertical residences),” said Richard Raymundo, managing director at Colliers.
The retail segment, he said, could make a swift recovery with the reopening of the economy, similar to the rapid rise in foot traffic during the Christmas holidays when mobility restrictions were eased.
For the hotel segment, Colliers reported that occupancy improved in the second half of 2021, partly due to the arrival of more Filipinos using hotels as quarantine facilities. While travel restrictions will continue to stifle demand, Colliers expects a slow recovery in hotel rates starting this year alongside a further improvement in occupancy.
Colliers has projected a 4 percent increase in Metro Manila’s hotel rates this year to an average of $66 per day while occupancy rate is seen to rise to 50 percent from 44 percent last year.
“We do not see an immediate rebound for foreign tourist arrivals especially given the impact of the Omicron variant on global air travel. In our view, local tourists, especially Filipinos returning from abroad, will continue to drive occupancy,” Bondoc said.
“We remain cautiously optimistic on the leisure sector’s potential for rebound, partly due to the improvement in Filipinos’ propensity to spend on leisure-related expenditures and as the government allows the reopening of more multiuse hotels. Meanwhile, hotel operators should continue sanitizing their facilities; complying with government’s protocols; and lining up marketing initiatives,” he added.
On industrial leasing, Colliers expects warehouse lease rates to grow at a faster pace than land leasehold this 2022. Rental rate is seen to rise by 2.8 percent from a marginal 0.6 percent last year.
Colliers sees more developers with logistics portfolio leasing out industrial space to meet the growing demand from e-commerce and online groceries.