By Rizal Raoul S. Reyes | July 24, 2024
AFTER facing several challenges in the first half of 2024, the country’s real estate sector is expected to bounce back in the second half of the year.
In its recent Mid - year Report of the Real Estate Industry, Lobien Realty Group, Inc. ( LRG) CEO Sheila Lobien said they are bullish in the second half because of the country’s resilient economy and the positive movements in transaction volume year- on- year ( YOY) across the real estate industry.
“The expected decrease in policy interest rates in the last quarter of the year, as inflation is projected to stay within the target range of 2 to 4 percent, will further help in the industry’s recovery,” Lobien added.
Meanwhile, the International Monetary Fund projected the country is poised to have another good year economically, with GDP being projected to be at 6.1 percent as inflation has been controlled under 4 percent as projected by the Bangko Sentral ng Pilipinas ( BSP), and policy interest rates to decrease as early as 3Q 2024.
Aside from these indicators, Lobien said other factors such as employment rate, OFW remittances, GDP from construction, real estate loans, building permits, and the overall real estate contribution to GDP, which are on an upward trend, are going to propel the industry towards a sustained recovery.
Office market
ALTHOUGH rents in Metro Manila have declined by 12.3 percent Year on Year, from P1,130/sq m to P990/sq m. Lobien said Metro Manila’s vacancy rate still stands at 18 percent.
The softening in rent, according to Lobien, can be attributed to having 2.3 million sq m of unleased or vacant office space and the 1.5 million sq m additional supply scheduled to be completed from 2024 to 2028. At initial glance, Lobien said the 1.5 million pipeline supply may be unreasonable given the high vacancy rate in NCR. However, a per city vacancy rate and pipeline supply analysis will reveal that developers are keenly aware of the situation and have started to rationalize the construction of new supply: Parañaque and Bay City’s 41 percent and 28 percent vacancy rates translated to lower pipeline supply of 5 and 7 percent, respectively. This behavior can also be observed on a total basis during the 1997 Asian and 2008 Global Financial Crises.
“We have also noted that the decline in rental rates is correlated to the current vacancy rates. As an example, Bay City and Alabang’s significantly high vacancy rates of 28 percent and 32 percent, respectively, resulted in substantial declines of 30.4 percent and 10.7 percent in average rents yearon year [YOY] as well. Makati’s 13 percent vacancy rate, meanwhile, resulted in a more manageable rental decline of 4.5 to 10.7 percent,” Lobien said.
Business process outsourcing (BPO) organizations driving growth outside NCR
JERICHO LINAO, director and chief operations officer of LRG, pointed out that township developments are boosting the growth in the provincial office market, and 60 percent of existing townships are found outside the National Capital Region ( NCR).
In their study, Linao said LRG observed a close parallelism between the existence of office space simultaneously with the presence of high- quality township developments. He said this is a logical move, as the business processing organizations ( BPOS) and traditional businesses aim to set up their provincial offices in townships to ensure that their office requirements and the retail and residential requirements of their employees are conveniently addressed.
Right now, the vacancy rate for the provincial office space market is at 27 percent. Moreover, Linao said there are 2.7 million sqm of provincial office supply available for lease based on combined current and pipeline supply. Rental rates during the 2Q 2023 that was at P610/sq m dropped to P550/sq m for the second quarter of this year. “This decline in the rental rates can be expected further in provincial locations to continue within the year in order to push excess supply,” Linao said.
With townships and key government infrastructure projects being developed outside Metro Manila, the BPO industry’s leveraging of the lower overhead costs, greater access to labor supply and their need to pandemic- proof their operations and traditional companies’ business continuity office strategies will continue to fuel provincial office space demand.
Industrial Market
STEPH NG, associate director and chief markets officer of LRG, gave a bullish outlook on the Philippine warehousing market as revenues are projected to grow from $750 million in 2022 to $ 1.2 billion by 2030, a compounded annual growth rate (CAGR) 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.
A total of 76 manufacturing and 22 agro- industrial sites are located across the country and are operating under PEZA. “The continuing growth in e- commerce revenues, expected to reach P 54 billion in 2024 [from P 34 billion in 2019], the demand for cold storage warehouses, and the growth of data centers are fueling this sub- market,” Ng explained.
Link to the article: https://www.pressreader.com/philippines/businessmirror/20240724/282007562638311
