The outlook for Philippine real estate is looking rosy. In 2022, office space transactions in Metro Manila grew 43% annually to 603,800 square meters, according to professional services firm Colliers Philippines.

Office space transactions within regions — a key barometer of investor sentiment in the country — rose by as much as 50%, with many outsourcing firms expanding operations within Metro Manila and in emerging markets outside of it.

According to the data, office space was quickly snapped up in Cebu, Davao, and Pampanga, which will account for 90% of transactions in 2022.

Coupled with the country’s 7.6% year-on-year economic expansion in 2022, despite record inflation and interest rates, Colliers predicts that demand for Philippine properties will continue for the rest of the year.

“An aggressive stance taken by the national government in attracting manufacturing investments should result in greater absorption of industrial space across the country,” Joey Roi Bondoc, research head of Colliers Philippines, said.

The data supports Colliers’ previous optimism for the Philippine real estate industry’s performance in 2022, when Mr. Bondoc stated that the “sector is expected to finish 2022 strong,” with “an optimism that is expected to persist through 2023 as recovery prospects are boosted by strong macroeconomic fundamentals.”

Real estate services firm Santos Knight Frank (SKF) echoed the positive sentiments, as their own data foresees a marked increase in activity in the hospitality and retail sectors.

Retailers and hotels are the property sectors that are rebounding the fastest as a result of the easing of coronavirus disease 2019 (COVID-19) restrictions and the resulting greater mobility among the populace, SKF Chairman and Chief Executive Officer Rick Santos told reporters.

“Brick-and-mortar retail and hotels were some of the most severely affected real estate sectors during the pandemic. Now that travel and mobility restrictions have been lifted, we are seeing the resurgence and ‘unfreezing’ not just of market activity but also development and expansion of players in these sectors,” he said.

Further boosting the growth of the hospitality property sector are the return of international flights, more face-to-face events, and China’s relaxing of its COVID-19 policy, as these factors will result in “revenge travel” from tourists.

Almost 2.65 million tourists visited the Philippines last year, a significant decrease from the nearly 8.26 million tourists that visited before COVID-19.

Mr. Santos said that they forecast that 2,692 more hotel rooms will be opened in Metro Manila alone between 2023 and 2024 to accommodate this year’s anticipated foreign guests.

In other sectors within the industry, Morgan McGilvray, senior director for occupier services at SKF, noted that the occupancy rate of retail spaces in Metro Manila by the end of 2022 was 93%, which is very close to the pre-pandemic level of 96%.

With the office sector, the sentiment is the same. The demand for office space is being driven by the information technology and business process management (IT-BPM) industry, and it continues to show promise.

Mr. McGilvray said that the rising inflation in the US and other countries is a positive for the Filipino IT-BPM industry since it means American businesses are considering cost-cutting measures that may involve setting up back offices offshore.

In this, the Philippines continues to be a hot spot for IT-BPM investments.

“We expect more leasing activity this year as a result of greater outsourcing requirements from developed economies, the availability of quality office space and companies adjusting their work setups. While we will continue to see some downsizing of footprints for Philippine headquarter companies, we still expect to see an overall net positive take up in 2023 driven mainly by the BPO sector,” he added.

Real estate services firm JLL Philippines reached the same conclusion, saying that the IT-BPM sector is expected to lead the market amid a grim economic environment.

JLL pointed out that monetary policy rate hikes issued by the Bangko Sentral ng Pilipinas (BSP) to control skyrocketing inflation will dampen the growth of the real estate sector significantly.

As the government weighs the proposed ban on POGOs (Philippine Offshore Gaming Operators), which may adversely affect approximately P65 billion ($1.2 billion) of economic contribution, the IT-BPM sector is expected to carry the recovery of the property industry.

JLL pointed out that the BSP anticipates 9% and 5% year-over-year increase in IT-BPM earnings in 2022 and 2023, respectively. The Information Technology and Business Process Association of the Philippines (IBPAP) also forecast that the sector will generate $59 billion in revenue and add 1.1 million new jobs by 2028, demonstrating continuous development despite a number of challenges.

As they expand their activities all over the country, the IT-BPM industry is expected to continue scaling up operations, which could lessen the market impact of the likely POGO withdrawal. — Bjorn Biel M. Beltran