INVESTMENTS

Resilience of Philippine Real Estate

PRIME Philippines Research & Advisory • May 27, 2020

The Philippine real estate industry has been very bullish for the past decade and has been able to withstand temporary setbacks. This pandemic, however, has definitely caused a decline across all markets. Despite this, the Philippine real estate industry remains to be perceived as generally resilient compared to other types of asset. Sentiments towards the sector have been relatively optimistic despite the impact of the pandemic due to the observed adaptive measures that companies have been doing to adjust to market changes. 

 

Office and Residential Sectors Seen as Most Resilient

Office sector performance, as seen in the slowdown of expansion activities, reduced rental rates, and lowered occupancy rates, has been dampened by the pandemic. Despite this, the IT-BPO industry, which is a major sector driver, is expected to support the sector’s performance. Post-pandemic, BPO companies are likely to expand outside Metro Manila, which could potentially encourage commercial development in those areas.

 

The residential sector has also seen a downtrend given the lower volumes of transactions, delay in new project launches, and postponed completion of ongoing projects. One of the primary challenges of this sector has been the provision of more attractive pricing strategies. To counter this, most residential projects have banked on the use of virtual tours and have revisited their pricing strategies to minimize operational hurdles and to identify buyers with liquidity.

 

Retail and Hotel Sectors Adapting to Demand Changes

The retail sector is still seen as among the badly hit market due to the forced stoppage of operations of malls and many other retail businesses. Most retail occupiers have asked for rental concessions, if not lease contract terminations. Despite this, many retailers are embracing the use of technology and venturing into e-commerce platforms to keep their businesses afloat during this period.

 

Similar to the retail sector, the hotel sector has undeniably been impaired. Before the pandemic, the hotel sector was already observed to have a slow start in 2020 due to multiple earthquakes and the Taal Volcano eruption. Adding to the injury were the pandemic risk mitigating measures employed such as event cancellations and travel restrictions. Still, the sector is striving to keep itself afloat by providing alternative uses for hotels including corporate leases.

 

Silver lining in Industrial Sector

Although supply chain disruptions have initially reduced the demand for the industrial sector, the increased preference of companies and consumers towards the use of e-commerce is seen to drive the growth of the sector. Warehouse rents are likely to remain stable or even slightly increase as demand is expected to increase. 


As we are approaching the end of the first half of 2020, we are seeing a mixed performance from the real estate industry. The pandemic has caused uncertainties and losses in the industry but it has also opened doors for real estate innovation and for property acquisition opportunities. Like all adversities, this pandemic will also pass. As businesses transition towards resumption of operations, the real estate industry will emerge stronger and more prepared for potential future disruptions.

Tags:
PRIME Philippines, real estate, philippine real estate, sentiments towards real estate sector, office sector, residential sector, retail sector, hotel sector, industrial sector, real estate industry performance, real estate innovation, property acquisition opportunities, COVID-19, tech in real estate
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