The worst is over for the Philippine property market due to various favorable factors, although the projected office space take-up remained low at 380,000 square meters only or 70 percent lower than the 1.9 million sqm recorded in 2019, according to the country’s leading property and management consultancy firm.
David Leechiu, president and CEO of Leechiu Property Consultants (LPC), believes the “worst is over” for the property market because all indicators are looking up. He, however, said that office space take-up this year is expected to be very soft 70 percent lower to 380,000 sqm from the 1.9 million sqm in 2019.
Nonetheless, Leechiu said growth this year will be driven by some factors, including the decision of the Supreme Court to stop the collection of the 5 percent franchise tax on offshore gaming operators or POGOs, the US political situation that will drive more cost cutting measures, new infrastructure, and the election spending,
On the decision of the high court stop the franchise tax collection on POGO operation, Leechiu said this will stem the exodus of POGOs, which left an estimated 300,000 sqm of office space vacant or 20 percent of total POGO office space in the country during the height of the pandemic.
In addition, he said the improving pre-selling activities of property developers as he noted of a 12 percent rise in land value in Bonifacio Global City, the country’s most prominent business district.
Sales of domestic companies such as Jollibee, Max’s, Shakey’s, SSI, he said, have been improving. Their sales are now 20 percent away only from their pre-COVID level and sales have been on the uptrend since October last year.
“That's a very good indication of our recovery,” he said. This is largely because of the reopening of the economy that also drive-up local tourism with many Filipinos going out to tourism markets that have opened up recently.
Another factor that will boost the property market is the opening of 12 new infrastructure projects.
Leechiu cited 12 new infrastructure projects including the Skyway Stage 3 will boost commercial and office spaces demand in central business districts like the BGC and Makati in Metro Manila. Although these new expressways have been delayed to 18 months instead of 12 months, these projects are starting to come online.
“That's going to introduce a new level of a new level of Philippines. It will be a new Philippines where people go back to office because they will try these infrastructure projects that they never thought was going to happen, or possible to happen,” he added. He cited that in every seven weeks, there will be new infrastructure that is going to be completed that will make working in the city more convenient and a totally new experience for Filipinos.
Companies are also expected to hold on to their offices because they have realized that work-from-home was an experiment, but given the option, he said companies will go back to the office because “one thing that is missing in online is the human collaboration when you are face to face.”
Also, 2021 is the year where most global corporations have realized how much organization size, they need to save cost to survive this crisis. Once they have done that, they will identify how much of that will be outsourced to the Philippines and India.
That is the reason that leasing prices in the BGC have held on to their rates. He, however, said that renewals are softer because tenants and landlords are still on that negotiation mode to come up with reasonable terms.
Because of cost cutting measures and the political developments in the US, it will be an exciting year for the Philippine IT-business process management sector, the country’s second largest export earner. “The BPO sector will continue to grow especially this year,” said Leechiu. He explained that the current political developments in the US will create an urgent need for companies to implement cost cutting measures by outsourcing their operations to the Philippines and India.
With classes expected to open gradually, he expects resumed buying of condominiums near universities for dormitories.
He also expects more economic stimulus happening in 2022 because it will be an election period. “Election is another source of funding for the Philippine economy because it will introduce significant amount of liquidity especially in the first quarter of next year,” he said.
“Because the economic activity is so much, more government spending and bank lending is coming back, dropping income tax, and tourism is coming back, so the worst is over,” he said.