Written by: Irma Isip | July 19, 2024
The contribution of real estate to the economy is seen going back to pre-pandemic levels this year, according to Sheila Lobien, chief executive officer of Lobien Realty Group (LRG).
In a press briefing, Lobien said real estate chipped in P1.1 trillion to the economy in 2023, a 90-percent recovery rate from 2019 when it contributed P1.2 trillion.
“When you look at real estate, it was never affected by the pandemic. In fact, it even went higher during that period. Companies and private individuals were taking loans from the bank and investing back into the sector,” Lobien said.
However, Lobien noted the industry is still in a challenging environment due to local economic headwinds such as persistently high inflation and higher-for-longer policy interest rates, geopolitical conflicts affecting the global economy, and the tail-end effects of the COVID-19 pandemic like work-from-home arrangements.
“This resulted in a slower-than-expected recovery in the first half of 2024.
However, the second half prospects are very positive because of a surprisingly resilient economy and noted positive movements in transaction volume year-on-year (YoY) across the real estate industry.
In the office market, while vacancy rate stands at 18 percent, rents have declined by 12.3 percent YoY, from P1,130 per square meter (sq.m.) to P990 per sq.m.
LRG said there are 2.3 million sq.m. of unleased or vacant office space and another 1.5 million sq.m. are scheduled to be completed from 2024 to 2028.
LRG said the business process outsourcing (BPO) industry will continue to push demand for offie space. The sector will require additional office space of 600,000 sq.m.
“We expect this trend to continue, although at a slower pace, over the next three years,” Lobien said.
The co-working space, or flexible office industry, is another source of growth of office demand with more than 240,000 sq.m. currently being occupied by flexible office companies.
LRG said there had been an increase of 100,000 sq.m. in office space leased YoY. Only 18,200 sq.m. was leased out of available supply in 2023 but had increased to 118,400 sq.m. as of the second quarter of 2024.
“This reflects the possible start of the office market’s recovery in Metro Manila,” LRG said.
For residential, Lobien said around 10,000 condominium units will be added in 2024 as demand continues to be robust.
LRG said condominium units registered the highest price increase at 10.2 percent YoY compared to the average of 6.1 percent across all house types.
“We still expect the demand for mid-to-high-end condominium market to remain,” Lobien said.
The provincial office market, meanwhile, is driven by township developments especially from BPOs and traditional businesses.
The vacancy rate for provincial office space market is currently at 27 percent.
LRG said there are 2.7 million sq.m.of provincial office supply available for lease based on combined current and pipeline supply. Rental rates fell to P550 per sq.m. in the second quarter from P610 per sq.m. in the same period in 2023.
LRG sees this trend to continue within the year in order to push excess supply.
The industrial market is a bright spot for real estate fueled by e-commerce, cold storages and data centers.
LRG said warehousing market revenues are projected to grow from $750 million in 2022 to $1.2 billion by 2023, a compounded annual growth rate of 6.5 percent.
One-third of the supply is in Metro Manila, another one-third is in Calabarzon and the remaining one-third is outside of these two locations.
