Strengthening real estate in the Philippines during an economic downturn (part 2)

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The initial publication of this article occurred on October 3rd. The article can be accessed at the following link: https://www.bworldonline.com/property/2023/10/03/549180/boosting-philippine-property-amid-a-skidding-economy-part-1/

SUBDUED CONDO DELIVERY
Metro Manila office transactions in the fi

In the first six months of 2023, there was a decrease of 9% in the total area of 306,000 square meters (equivalent to 3.3 million square feet), compared to the 324,000 square meters (3.5 million square feet) reported in the previous year.

In 2023, it is estimated that there will be an increase of 668,400 square meters in new supply. The majority of this new supply will be located in the Ortigas central business district, Fort Bonifacio, and Quezon City.

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Between 2023 and 2025, we anticipate that there will be a yearly release of 492,400 square meters (equivalent to 5.3 million square feet) of fresh office space.fi

This area is equivalent to 50% of the total amount of space delivered each year between 2017 and 2019, which was almost 1 million square meters (10.8 million square feet). During this time period, there was a positive balance between completed projects and demand.f

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As of the end of the second quarter, the vacancy rate has reached 18.4%. However, we predict that by the end of 2023, the vacancy rate will rise to 21.2%. This increase is due to a significant amount of new supply that is expected to be completed in the second half of the year, estimated at approximately 538,900 square meters (or 5.8 million square feet).

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Although there has been a decrease in vacant areas throughout Metro Manila, some residents still try to justify the potential repeal.fi

This space is no longer available due to a variety of reasons, including non-renewal, pre-termination, and rightsizing.

In the second quarter of 2023, the average rental prices for office spaces in Metro Manila remained consistent. Our analysis reveals that areas with consistent demand experienced an increase in rental rates.

In the second half of 2023, areas with a lot of new properties being added and a high number of empty spaces will probably experience a decrease in rental prices.

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We have recorded data from 52% of the population, which is great news.fice space transactions even outside Metro Manila. At Colliers, we always recommend that developers continue to be on the lookout for opportunities to develop more office towers in major outsourcing hubs outside Metro Manila including Iloilo. 

Real estate companies should continue to investigate potential development prospects in important expanding regions and make the most of the supply of highly qualified workers and excellent infrastructure.

TEMPERED REVENGE DINING, SPENDING

Colliers predicts that the retail industry will experience growth due to a positive economic and consumer sentiment. This is supported by the fact that the Philippine economy is heavily reliant on household spending. Malls are seeing a consistent increase in foot traffic, particularly on weekends, and experiential retail is making a comeback.

Retailers should act fast in securing prime locations in major business districts across Metro Manila as lease rates are on the rise.

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As foreign retailers show increasing interest, Colliers suggests that mall operators take advantage of the demand.firms by taking into account their size and fit out requirements.

Both online and in-store shopping will continue to work together, motivating mall owners and stores to enhance their omnichannel plans.

In the retail industry, many businesses are focusing on innovation in order to maintain high levels of foot traffic and spending per customer. It is crucial for activity and event centers to resume operations, as people are eager to leave their homes and engage in shopping and attending mall events.

Filipino consumers have undeniably returned to shopping. While physical shopping spaces in malls are becoming important as the go-to public areas for Filipinos, online shopping is still in high demand. As a result, it is crucial for major retailers to have distribution centers strategically placed both inside and outside of Metro Manila to accommodate savvy shoppers, particularly those who want their purchases delivered within a day.

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Differentiate, and ultimately capture a larger portion of the Filipino consumer market.

 

Joey Roi Bondoc serves as the research director at Colliers Philippines.