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Jan 15, 2024

Lobien Realty Group sees the real estate sector continuing its recovery trajectory in 2024.

For the Metro Manila office space segment, annual demand will reach 400,000 sqm while new supply will be at about 500,000 sqm, resulting in vacancy rates easing to less than 15 percent. Average rental rates, however, are seen staying in the P1,100-per-sqm level.

The BPO industry will continue to be the main demand driver while back-to-work mandates will prompt companies to secure spaces with better deals. Industrial real estate will maintain its compounded annual growth rate of 5 percent to 7 percent, while townships will prop the residential and commercial office spaces. Tourist arrivals, projected to breach 7 million in 2024, will accelerate the hospitality segment's recovery in terms of room and occupancy rates.

Industrial real estate, including warehouse and storage, is poised to sustain its upward trajectory, fueled by the anticipated 20 percent growth in e-commerce. The sector is expected to reach approximately P700 billion in revenue next year.

The hotel sector will also post another good recovery owing to expectations that tourist arrivals will grow by 40 percent to 7 million in 2024. Townships will likewise drive residential/condominium growth as more discerning investors, including overseas Filipino workers (OFWs), are beginning to find merit in investing in real estate, particularly those situated in integrated mixed-use developments. OFW remittances in 2023 is expected to hit $37 billion which will possibly increase to $39 billion in 2024.

Real estate investment trusts (REITs) will continue to be a good investment avenue for real estate players. Once inflation becomes within range and the interest rates tightening is reversed, REIT prices are seen to recover. For this year, it is expected that REIT dividends will grow 5 percent year-on-year-which is good news for REIT investors.

Township residential/condominium units will also continue to be the trend as a result of its functional value being realized during the pandemic as well as its resilience in price fluctua- tions. However, based on the 2023 Bangko Sentral ng Pilipinas real estate data, loans for single detached homes rose by almost 50 percent, a trend that may continue because of the need for more space by families-something that became more pronounced during the pandemic.

Meanwhile, the growth in warehouse and storage will continue by necessity, as the financial markets support more digitalization of purchase transactions.

The hotel sector will post another good recovery owing to expectations that tourist arrivals will by 40 percent in 2024.

The impact of proptech and AI in real estate is not yet significant at the moment, except for the use of the internet and digitalization of certain aspects of the real estate processes, including brokerage services.

However, as Al becomes more powerful, the real estate industry has to adopt new technologies, adapt to the challenges it will present, tap the opportunities it will offer, and embrace its value in facilitating real estate transactions.

The challenges being faced by the country's real estate industry are now remotely related to the pandemic. These are now more economic in nature, chief of them would be the current high interest rates which is the government's logical response to elevated inflation.

The higher interest and inflation rates have negatively impacted real estate investments, decisions, as well as actual construction and take-up. With the Russia-Ukraine conflict and the prevailing supply chain issues now factored in economically, the inflation being within target of 2 percent to 4 percent next year,
and an expected GDP of 6 percent in 2024, the real estate industry is poised for a strong performance in 2024.