The Philippine economy continues to recover as more businesses resume operations and expand.
Colliers Philippines believes that the property market is well-positioned to ride this growth trajectory. The office sector is seeing an increase in transactions within and outside Metro Manila, with the capital region registering two consecutive quarters of positive net take-up, while H1 2022 figures indicate an improvement in pre-selling condominium launches and take-up.
The confidence to spend and travel is resulting in improvement in mall space absorption, retail rents, and hotel occupancy rates. With property and the economy both in recovery mode, Colliers Philippines believes that developers should also expand their footprint in key growth areas outside Metro Manila.
Office: Gradual leasing recovery
Colliers saw sustained leasing activities in the Metro Manila office market. We recorded about 325,100 sqm of office transactions in the capital region in H1 2022, and the completion of 146,700 sqm of new office space in Q2 2022. From 2023 to 2026, we forecast the annual completion of about 543,300 sqm. We see annual new supply reverting to pre-Pogo (Philippine offshore gaming operator) levels when yearly completion was between 450,000 and 550,000 sqm from 2014 to 2016, far from the annual delivery of 983,900 sqm from 2017 to 2019, a peak period for Pogo take-up.
Meanwhile, vacancy as of Q2 2022 reached 17.7 percent. By the end of 2022, we project office vacancy to reach 18.2 percent from 15.7 percent in 2021. We expect net take-up in 2022 to reach 350,000 sqm from −273,300 sqm in 2021.
Residential: Pre-selling demand rebounds
Colliers recorded the completion of 1,290 units in H1 2022, down 80 percent year on year. We expect supply to pick up in H2 2022 with the delivery of 8,800 units. The Bay Area will likely account for about 60 percent of new supply in 2022.
Pre-selling condominium take-up in Metro Manila reached 5,500 units in Q2 2022, up from 3,100 units sold a quarter ago. Meanwhile, pre-selling launches reached 6,970 units in Q2 2022, up 428 percent QOQ. In our view, take-up in 2022 is likely to breach 2021 figures.
In Q2 2022, rents in the secondary market picked up by 0.4 percent QOQ, the first recorded increase after eight consecutive quarters of decline. Meanwhile, we saw prices increasing further by 0.8 percent QOQ.
Colliers believes that improving consumer and business sentiments and sustained remittances from overseas Filipino workers (OFWs) should support residential demand for the remainder of 2022. However, we see rising interest rates, increasing prices of construction materials and compressing yields likely hampering condominium launches across Metro Manila for the remainder of 2022.
Hotel: Revenge travel kicks in
Data from the Department of Tourism (DOT) showed that foreign arrivals reached 814,144 as of H1 2022, 1,300 percent higher compared to the 58,177 international visitors a year ago. The relaxed entry restrictions lifted foreign arrivals. By the end of 2022, DOT expects international arrivals to reach 2 million from 163,879 in 2021.
Meanwhile, the share of tourism to the country’s economy improved to 5.2 percent in 2021 from 5.1 percent in 2020. Domestic tourism supported recovery as data from the Philippine Statistics Authority (PSA) showed that domestic trips reached 37.3 million in 2021 from 27 million in 2020.
Average hotel occupancy rates in the capital region also rose to 47 percent in H1 2022 from 44 percent in H2 2021. We attribute the improvement to the gradual return of business travel; local tourists’ rising propensity to spend on leisure; growing demand from the staycation market; and the rebound in foreign arrivals.
We project occupancy to hover above 50 percent by the end of 2022 and this should be supported by holiday-induced spending and return of Filipinos working abroad.
In H1 2022, Colliers saw the delivery of 834 rooms. By the end of 2022, we estimate about 1,830 new rooms coming online. From 2022 to 2024, we project the annual completion of 2,650 rooms. About 36 percent of new hotels rooms likely to be delivered during the period are from foreign brands.