LAND VALUES in Metro Manila are seen to drop 5-15% by the fourth quarter as rents and selling prices decline due to the impact of the coronavirus disease 2019 (COVID-19) pandemic.

Property consultancy firm Colliers International Philippines said in an online briefing on Wednesday that central business districts will take a hit from the slump in real estate demand.

“The average land values, we’re already seeing (a decline of) between 5% to 15% between the major business districts in Metro Manila… We have to consider that whenever we project land values, we’re also factoring in the prices of condominiums for residential projects. That has an impact definitely in terms of our projected land values,” Colliers Philippines Research Manager Joey Roi H. Bondoc said.

Specifically, Makati central business district is seen to record a 10% drop in land value to P773,000 per square meter (sq.m.) by the fourth quarter. Land values in Fort Bonifacio are also expected to decline 10% to P745,000 per sq.m.; in Manila Bay area by 15% to P332,000 per sq. m.; and in Ortigas Center by 5% to P337,000 per sq. m.

“We are projecting a 15% drop in average price of condominium units across Metro Manila, so definitely that has an impact on land values moving forward,” Mr. Bondoc said.

Take-up across real estate segments is also expected to slump.

Colliers Philippines said office vacancy may rise up to 5.5%, but with gradual recovery coming in by 2021 and 2022. Office supply will slow to 26% this year because of work suspension in construction sites and social distancing measures even after the lifting of enhanced community quarantine (ECQ). Online gaming operators may also reconsider expansion, while other tenants pause long-term occupancy decisions.

To kickstart recovery, Colliers Philippines said the office sector will have to rely on outsourcing tenants and traditional firms that still maintain operations. It urged the government to lift the moratorium on new economic zones in Metro Manila in order to attract global companies.

“The availability of PEZA (Philippine Economic Zone Authority) ecozones will be a significant factor given that without the incentives, it will be riskier for BPOs (business process outsourcing companies) to continue outsourcing here in the Philippines,” Colliers Philippines Director for Office Services Dom Fredrick Andaya said.

For the residential segment, a 15% price drop and a 5.5% rent drop are expected in major central business districts this year, with gradual rise seen next year. Colliers Philippines said this is due to rising unemployment rate, lower interest rates and reduced consumer confidence.

Property firms may also defer new launches this year, reducing the projected total supply by end-2022 by 3,000 from Colliers Philippines’ previous forecast of 14,000.

The retail segment also faces a slowdown as companies shift to online. Consumer spending is also expected to be muted as remittances fall and unemployment rises.

Colliers Philippines said opening of new malls will likely be pushed back because of work stoppage. He noted online retailers will shine as the practice of social distancing persists.

“What’s happening right now is we’re at this pivotal point wherein it will become a tenants’ market. It’s softer, the rentals are softer, there are price corrections… But with that, there are opportunities for companies who are doing very well in this market, looking to expand,” Colliers Philippines Managing Director Richard T. Raymundo said. — Denise A. Valdez