It may take the Philippine real estate sector two to three years to return to pre-pandemic viability, based on a study by global commercial real estate consulting firm Cushman & Wakefield.
Based on the second edition of Cushman & Wakefield’s survey of real estate developers’ COVID-19 survey, real estate companies had become less optimistic in the short term as they expected the market to remain vulnerable amid weak sentiment and lower supply and demand as well as falling property values and rental prices.
The latest study sought to measure changes in real estate developers’ views on the recovery potential of the economy and the real estate sector, as uncertainties remained more than a year since the pandemic broke out when the first issue of the study was released.
Respondents expressed optimism over the next 12 months, with 31 percent expecting the real estate market to show early signs of improvement – with both supply and demand strengthened along with moderate growth in property values and rental rates. Nevertheless, the respondents saw the market remain vulnerable for the next 12 months.
In the long run — or a period of two to three years — 62 percent expected the real estate market to pick up speed. During this time frame, 31 percent believed that property values and rental prices would return to the pre-pandemic level, while the other 31 percent expected moderate growth in property values and rental prices.
The demand outlook for the industrial sub-sector was seen as promising, with 83 per cent of industrial developers expecting an increase in the new rental volume, while 50 per cent saw an increase in sales over the next 12 months.
But the outlook for the retail and hotel sub-sectors remained sluggish, with 75 per cent of hotel and retail developers expecting the decline in occupancy to continue over the next 12 months.
In the office sub-sector, 54 percent of office developers expected a decline in the new rental volume.
Meanwhile, the majority of home developers (38 percent) expected a drop in sales over the next 12 months.
In the area of hospitality, 75 percent of hotel developers were likely to make rental adjustments over the next 12 months, while 63 percent of mall developers said they were more likely to do the same. While 31 percent of office developers projected rent adjustments over the next 12 months, a further 31 percent felt they were less likely to do so.
68 percent of industrial developers believed that rent adjustments would not be necessary within the next 12 months.
“The market upturn will be uneven across property sub-sectors, as the respective sources of demand have been affected to varying degrees. The COVID-19 pandemic has disrupted the various sources and growth in demand for the various real estate sub-sectors, affected by a similar uneven economic recovery in the global market, says Claro Cordero, director and head of research, consulting and advisory services. at Cushman & Wakefield.
Cordero suggested that the success of recent real estate investment funds (REITs) shows that this new asset class has a strong potential to contribute to the growth of the sector.
Given the market environment and challenges posed by the COVID-19 pandemic, property developers should offer well-diversified assets across different sub-sectors and locations — that is, within key commercial business areas in Metro Manila and other asset classes and growth areas outside Metro Manila. A well-diversified REIT vehicle provides downward protection and creates value for its shareholders, ”he said. INQ
Subscribe to INQUIRER PLUS to access The Philippine Daily Inquirer and other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4:00 and share articles on social media. Call 896 6000.