REAL ESTATE brokerage and consultancy firm KMC Savills on Tuesday expressed “cautious” optimism about the Philippines’ property sector this year.
“We’re cautiously optimistic. I think there’s no point in getting too far ahead of ourselves or too overly bullish or overly optimistic,” said KMC Savills Chief Executive Officer Joe Curran during a media briefing.
Among sectors, KMC said it is optimistic for office, retail, and tourism and hospitality, but uncertain about residential as well as industrial and logistics.
Mr. Curran said that office demand is expected to sustain while an increase in vacancy rates is anticipated due to multiple office building completions in 2024.
He added that Bonifacio Global City (BGC) in Taguig City is still the “favorable location” for prime buildings, which boasts over two million square meters (sq.m.) of office space.
“We do see some new supply coming online in 2024 and 2025 that should have an impact on rates and vacancy. There’s about another 180,000 sq.m. of completions in BGC,” Mr. Curran said.
Some of the expected completions include Uptown Eastgate (105,000 sq.m.), International Finance Center (63,000 sq.m.), MJ Fort Tower (8,000 sq.m.), and Sennett Corporate Center (5,000 sq.m.).
In 2023, BGC’s office vacancy rate hit 14.3%, higher than the Makati central business district (CBD) at 10.9%. However, other areas logged higher office vacancy rates such as Bay Area (32.6%), Ortigas Center (25.7%), and Alabang CBD (35.5%).
Mr. Curran said the average post-pandemic Metro Manila office lease rates have declined 6.7% to P858 pesos per sq.m.
KMC data showed that the average office rate in BGC is P1,054 per sq.m., higher than Makati CBD (P1,021.2/sq.m.), Bay Area (P737.9/sq.m.), Ortigas Center (P695.8/sq.m.), and Alabang CBD (P603.3/sq.m.).
“Post pandemic, we’re still in a period of price discovery in terms of where our rental rates are going to fall for the next three to five years. BGC still has the highest headline rates across the metro,” Mr. Curran said.
“Higher vacancy rates and potentially with 180,000 sq.m. of new supply coming online over the next two years, you might actually see some downward pressure on rents in BGC and Makati might move back into top spot in terms of being to command the highest rents across the metro,” Mr. Curran said.
For the industrial sector, KMC Savills Chief Operating Officer Cha Carbonell said that elevated vacancies will put pressure on warehouse rent rates.
KMC data showed that rental rates in Bulacan and Pampanga fell by 42% and 21%, respectively.
“Empty warehouses stand as stark reminders of the economic slowdown, pushing industrial rental rates down. Particularly noteworthy are the significant decreases in Bulacan (42%) and Pampanga (21%),” she said.
“Manufacturing companies lead the demand for industrial warehouse space at 41%, followed by third-party logistics and fast-moving consumer goods,” she added.
In the residential sector, KMC Savills Associate Director for Research Joshua De las Alas said that property developers are now focusing on high-end and luxury developments.
KMC data said the Metro Manila market has only sold 65% of the 113,000 units floated, both for pre-selling and ready-for-occupancy units, with 40,000 units still left unsold, half of which are from mid-market developments.
He added that sales of mid-market condominiums have declined as a result of rising interest rates as well as lesser need for employees to live near their workplaces.
“A dip in the take-up rate for low-middle segments serves as evidence of a shifting market, reflecting a general lack of appetite and decrease in purchasing power. Furthermore, the significant number of withdrawals from the mid-end segments contributed to the slow take-up rate,” Mr. De las Alas said.
In the retail sector, KMC said it is optimistic since occupancy rates and foot traffic are slowly getting back to pre-pandemic levels amid the normalization of business operations across the country.
It added that the tourism and hospitality sector has a bright outlook as international tourist arrivals increased by 105% to 5.45 million international visitors in 2023. — Revin Mikhael D. Ochave