By Bjorn Biel M. Beltran
Special Features Assistant Editor, BusinessWorld
The coronavirus pandemic has all but stopped the property industry in its tracks. For the past few months, real estate has essentially become a waiting game for both investors and developers as the nationwide quarantine put a stop to the growth of businesses everywhere.
Analysts at the property consultancy firm Colliers International predicted in an online webinar that land values in Metro Manila will drop by as much as 15% by end of the year, as rents and selling prices decline due to the pandemic, even in the country’s busiest business districts.
“For the first quarter of 2020, we’re seeing a 5-15% reduction in land values. We see this for the likes of Makati CBD, Fort Bonifacio, and the Manila Bay area,” Colliers Philippines Research Manager Joey Roi H. Bondoc said.
According to Colliers data, the Makati central business district is projected to see 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.
Contractions are expected to reverberate across the different real estate segments, from office space to retail, at least until 2021 or 2022. Colliers sees higher office vacancy in 2020 due to a slowdown in leasing activities following the adverse impacts of the pandemic and lockdown in Luzon.
Residential demand in the metro is also expected to soften this year due to the impact of the COVID-19 pandemic, with the only hope of recovery contingent on the successful containment of the virus within the first half of the year.
Meanwhile, retail demand faces the challenge of a marked slowdown of the country’s economy, erosion of consumer confidence as well as implementation of physical distancing measures post-pandemic.
Adapting to a post-pandemic world
To mitigate the impact of COVID-19, Dom Fredrick Andaya, Colliers Philippines director for office services, suggested that real estate developers take small, incremental steps to better position their businesses post-pandemic.
“We need to take incremental decisions during this period. Information, in terms of what’s going to happen or what the returns will be, will not be available. But we need to make decisions,” he said.
“By taking incremental actions during this period, we might see a rebound sooner rather than later. And we would avoid worst-case scenarios.”
Opportunities could lie in catering to the business process outsourcing industry, he added, as foreign companies take advantage of the lower costs of outsourcing to kickstart their operations abroad after the pandemic.
“BPOs thrive because of cost pressures. And because of COVID, doing business will even become more expensive. That’s applicable globally,” he said.
“Of course, there are technology solutions to address cost pressures, but outsourcing remains to be an effective way of addressing those cost pressures. Demand has slowed down, but we would see another surge of outsourcing eventually in the next several months, similar to what happened in the past.”
Richard Raymundo, Colliers Philippines managing director, also noted that the pandemic could also fast-track foreign investors’ plans to establish offices outside Metro Manila to create better resilience in their operations in the future.
“[Investors] want to have an office in the north and one in the south so that if something happens like this, their workforce is geographically diverse. It won’t be difficult for them to adjust. That could be one interesting trend that we’re gonna see after this,” he said.