Property take-up seen to significantly drop

MANILA, Philippines — Real estate services firm Colliers International Philippines expects the take-up of hotels, office spaces and residential property in Metro Manila to decline amid the coronavirus disease 2019 (COVID-19) crisis.

Among all property sectors, Colliers said, the hotel segment would get hurt the most.

Metro Manila hotels are recording occupancy rates of about 30 to 40 percent, lower than its initial estimate of 60 percent which factors in a significant drop in Chinese and Korean tourists.

As Metro Manila is covered by the enhanced community quarantine in Luzon, meetings, incentives, conferences and exhibitions demand is likewise affected.

Given the impact on the hotel segment, Colliers recommends that operators start planning marketing efforts to recapture foreign and domestic tourists after the COVID-19 crisis.

“Hotel operators, retail establishments, and allied services should closely monitor developments related to stimulus policies from the government,” it said further.

In terms of Metro Manila office space, Colliers initially projected take-up to reach 900,000 square meters (sqm) this year, with more than 300,000 sqm to come from Philippine offshore gaming operations (POGOs).

If office space take-up from POGOs drops to 100,000 sqm from the initial estimate of 300,000 sqm due to a travel ban amid COVID-19, Colliers said Metro Manila office vacancy would increase to 6.8 percent from 4.3 percent last year.

If no additional space is taken up by the POGO sector this year, vacancy could rise to 7.6 percent.

Depending on the extent of the community quarantine in Luzon due to COVID-19, Colliers said the possible upside for the office sector is the expansion of other sectors such as outsourcing and traditional firms.

Should outsourcing and traditional firms expand in the second half, Colliers said the vacancy would likely be around 6.8 to seven percent.

In the event the pandemic takes a more significant toll on demand, the vacancy could be closer to eight percent this year.

For office space occupiers, Colliers recommends they look for new buildings in fringe locations where rents are cheaper and to negotiate for long-term leasing deals.

As for landlords, Colliers said they could attract traditional or outsourcing tenants for spaces to be vacated by POGOs by targeting businesses which are likely to remain stable despite threat of COVID-19.

Colliers also recommends landlords to provide flexible lease terms and to prioritize wellness certifications of buildings.

In terms of the residential sector, Colliers projects a drop in demand and slowdown in take-up in select business districts in Metro Manila should the COVID-19 situation worsen.

Colliers estimates about 14,000 residential units to be completed in key districts of Metro Manila this year, with about 79 percent or 11,000 units likely to be in the Bay Area.

Factoring in a slower demand from Chinese investors especially in business districts where demand is mainly POGO-driven, Colliers said Metro Manila vacancy is expected to increase to between 16 percent to 18 percent this year from the previous year’s 11 percent.

To attract buyers, Colliers said developers could offer more flexible packages or terms and put emphasis on property management as it is crucial to the health and safety of the building.

Meanwhile, Colliers said end-users and investors could take advantage of opportunities to negotiate better pricing for both pre-selling and secondary markets.

“Look for units in sub-markets where there is still potential for capital value appreciation and where price increase has been due to end-user demand,” Colliers said.