Property developers less optimistic of short-term recovery, survey shows

MANILA, Philippines — Most property developers remain less optimistic of the real estate market as they expect capital values and rental rates to soften in the short term, a survey by a leading property consultancy firm showed.

Based on a Cushman & Wakefield Philippines survey of property developers, 67 percent of real estate proponents are still unsure of the country’s economic recovery path in the next 12 months.

In the medium term, however, developers express optimism that the property market will show early signs of recovery along with moderate growth in capital values and rental rates.

“Market vulnerability will persist in the mid-term. In the long term or a period of two to three years, the developers are very optimistic of the full recovery of the property market and expect that the market will again build up momentum through a strong rebound of both supply and demand growth drivers,” Claro Cordero Jr., director for research, consulting and advisory services at C&W Philippines said.

“By then, the developers also expect a sharp growth of capital values and rental rates. The fundamentals for the Philippine real estate market remain very strong.”

Real estate developers also maintained a bright outlook toward the office and industrial sub-sectors which remain resilient during the pandemic.

C&W Philippines said 44 percent of the respondents expect the office sub-sector to recover the fastest, as demand for IT-BPM activities are expected to grow post-pandemic period. On the other hand, 55 percent of the respondents have expressed no change in the project pipeline for industrial developments over the next 12 months.

In terms of demand, 61 percent expect demand for industrial space in the next 12 months will not be far from its pre-COVID levels.

On the other hand, C&W said it expects supply of new hotel and retail space to fall significantly in response to revenue losses.

“Significant reduction in the supply of new hotel and retail space is expected as roughly half of the hotel and retail development pipelines over the next 12 months are indefinitely stalled by the pandemic. With the tourism industry on standstill and the uncertainties continue, 88 percent of hotel developers and 53 percent of retail developers expect revenue losses of greater than 50 percent in the next 12 months,” it said.

Following the more relaxed quarantine restrictions toward the end of the second quarter, establishments other than the essential ones have been allowed to partially resume operations in shopping centers with strict implementation of security and sanitation measures.

However, footfall remains far below pre-COVID levels with dampened consumer sentiment and weak household spending as consumers are holding back consumption amid the uncertainties that surround the pandemic.