GRADUAL RECOVERY ACROSS ALL SUBSECTORS

CLARO DG. CORDERO JR.

Barring any major uncontrolled spike in COVID-19 infections due to the gradual reopening of the Philippine economy, we forecast a gradual recovery of the demand sources across all real estate sub-sectors, albeit still below prepandemic levels.

Demand drivers

In the office sub-sector, the resurgence in expansionary demand coming from the information technology and business processing management (IT-BPM) firms will help improve occupancy rate, especially in established business districts.

Pent-up residential demand will be focused on developments that adequately address health and sanitation, improved circulation, and well-being through functional and highly sustainable masterplanning and design.

Retail and shopping mall developments will gradually recover, but will be significantly focused on experiential shopping and will incorporate demand from tenants catering to their respective omni-channel marketing strategies.

The recovery of tourism and hospitality developments will be bolstered mainly by domestic tourism and we expect the emergence of new tourism destination and developments in less dense environment/communities.

Logistics and warehousing will remain on an upward growth trajectory as demand for goods remains supercharged due to gradual re-opening, growing confidence and a shift in consumer spending patterns.

However, the growth of the logistics and warehousing markets and the industrial real estate sub-sector, in general, will be challenged by the supply-demand imbalance in the global supply chain.

Finally, we think that the consideration of environmental, social and governance (ESG) factors will increasingly become a requisite for property investments.

Confidence in the market

REIT offerings and new project launches show the confidence of developers and investors in the local real estate market amid the pandemic.

These new developments provide an avenue to democratize real estate investments and allow more people to participate in the anticipated growth of the industry post-pandemic. It also provides a good diversification strategy and a shield against future market downturns and cycles.

In terms of headwinds, we are still wary of future supply; while demand has yet to recover and, coupled with cyclical factors, may delay the growth of the industry in the medium term.

Further, we believe that factors surrounding the successful containment of the virus such as the vaccination rollout, including the prescribed booster shots, and the discovery and global spread of new COVID-19 variants will have direct effects on the opening of the economy.

New trends

There are a number of new trends we expect to see in real estate.

The future of our workplace will be a combination of urban and sub-urban locations. We believe that large organizations will increasingly rely on a variety of locations.

Urban areas will still offer the unique features to foster collaboration hubs while sub-urban locations are likely to offer smaller community spokes. However, cities and communities outside major CBDs could also be the magnet for needed talents, especially if these areas are equipped with universities and centers of education.

As a result, people could choose where they want to live—in a farm estate, beach location, among others. Proximity to workplace will become a less important consideration. More people will choose where to live based on the quality of communities, amenities, access to transport hubs, education, quality of housing and proximity to recreational features. Even post-pandemic, buyers and investors will still prefer to live in developments with less dense environment and with sustainable masterplanning/design. In the future, we believe that townships, especially in the countryside, will be set up as sustainable communities to address issues such as climate change and resource scarcity; demographic and social changes; technological breakthroughs; development of countryside; and rapid urbanization. These trends will help shift the way we live and work and will be the future of real estate.

REIT offerings, new project launches show the confidence of developers and investors in the local real estate market