BOARDWALK Siargao’s world-famous Cloud 9 surfing spot, whose awesome waves can reach as high as 5 to 6 feet, without the crowd at the break of dawn. —Photo by Vanessa B. Hidalgo
The Philippine tourism sector is expected to continue its recovery after suffering deep cuts during the COVID-19 outbreak in 2020, a crisis that had bludgeoned a huge number of industries, including the property sector.
The government is anticipating international tourist arrivals to reach 4.8 million for the entirety of 2023, recovering about 58 percent of the prepandemic headcount in 2019.
But coming from a historic low of just 1.48 million visitors in 2020, this signals a resurgence that appears on track as the number reached 2.67 million just last month.
David Leechiu, CEO of real estate consultancy firm Leechiu Property Consultants, Inc. (LPC), believes this upturn in the economic sector bodes well for the local property market.
“Once the tourism industry becomes fully scaled, that’s when we will see more employment and economic activity,” says the property industry veteran of more than 27 years.
“And those people who become employed will create their own economy. That is when people can afford to have insurance; they will have bank accounts; they will have credit cards; they will have home mortgages,” he adds.
To capture the rebound in tourism, driven not just by foreign but also domestic travelers, leisure estate developers are increasing their hotel supply pipeline, with 68 new hotel properties seen opening within the next four years or so, 16 percent of which will come in the next 12 months. Cumulatively, these developments are expected to add 15,928 guest keys to the local hospitality space, according to LPC.
The hotel pipeline reflects a “collective commitment” to the Marcos administration’s target to bring in 12 million foreign tourists by 2028, it adds.
Meanwhile, beachfront properties have become more valuable as improving internet connectivity has allowed outdoor lovers to work from anywhere they please.
For instance, LPC data show that land values during the first half of the year in Siargao, a popular surfing and beach-hopping destination, hit as much as P50,000 per square meter (sqm) for beachfront properties, while nonseaside lots fetched P2,000 to P20,000 per sqm.
No fundamental damage
Leechiu adds that the recent blunder in the government’s tourism campaign will have no real negative impact on the country’s tourism sector, other than the obvious waste of public funds.
“There are so many individuals promoting the Philippines on Youtube and on Instagram. Those are doing a much better job in promoting the country and they are probably more credible because they are giving live, on-the-ground experiences,” he says, when asked if he believes in the effectiveness of tourism slogans.
To recall, the Department of Tourism unveiled its new slogan “Love the Philippines” late last month, replacing the 11-year-old “It’s more fun in the Philippines” tagline.
Not only did the tourism department receive criticism for sounding more like a command rather than a catchy invitation; the contract with the advertising agency behind the P49-million project was also abruptly terminated after the firm admitted to using stock footage of other countries for the very public promotional video.
Over the long run, Leechiu believes that tourism, with its huge multiplier effect, could be a new economic driver for the country in the same way that business process outsourcing and labor exporting have been.
Pogos coming back
The overall Philippine property market is faring better amid the postpandemic economic reopening, with the office market recording 540,000 sqm of tenant demand in the first half of 2023, outperforming the numbers in the same period last year by 46 percent.
Philippine Offshore Gaming Operators, also known as Pogos, have acquired a significant amount of space for the first time since the start of the pandemic, according to the property consultancy firm. This totaled 88,000 sqm in the first half alone versus the 89,000 sqm in the last three years combined, LPC data show.
“The Pogos are a very important economic component. The benefits far outweigh the cons. All we have to do is implement the law,” Leechiu says, citing that it would be a bad call for the government to phase out the multibillion-peso online gaming sector over the perceived social costs of hosting these businesses.
The demand for office space still largely rests within the National Capital Region, which accounted for 77 percent of total in the first half, while the different economic hubs in the provinces—such as Cebu, Clark and Cagayan de Oro—comprised the remaining 23 percent.
The Philippines’ office vacancy rate was also pegged at 17 percent as of the second quarter, with the completion of new buildings offsetting the rising demand and resulting in just a modest decline in vacancies. Office vacancy rate averaged 6 percent in 2019 before soaring to a high of 21 percent in 2021 and easing to 19 percent in 2022.
Green shoots
Developments in the residential market segment saw an 8 percent growth in Metro Manila condominium launches to 5,979 units in the second quarter from 5,543 units in the first quarter. LPC says this indicates a sustained improvement in developer outlook.
However, condominium presales declined by 27 percent from the previous quarter. The softer demand was attributed to stricter buyer screening by developers, as well as tighter credit standards that have been implemented to raise the quality of buyers and mitigate the risk of soured loans. Only 8,741 units were taken up by the residential market in the second quarter via preselling compared with 12,037 in the previous quarter.
Bulk of the demand came from upper middle (with the cost of P4 million to P7 million per unit) and upscale (P7 million to P12 million) condo projects.
In the industrial segment, warehouse stock has grown consistently in the last decade, with a 14 percent compounded annual growth rate.LPC says that the food sector accounted for more than a third of tracked demand for industrial space across the country, with demand from the manufacturing and third-party logistics sectors having also rebounded in the last year.