Since the spread of the COVID-19 pandemic, a lot of countries, both big and small seemed to be caught unprepared for the tirade of issues it had been presenting. Businesses bore the brunt of the repercussions. As more and more people get infected with the virus, fewer and fewer businesses are able to thrive.
Suddenly, everyone’s lives are at a standstill. 2.6 billion people across the globe are being forced to stay indoors in an effort to flatten the curve, and hopefully, soon, extinguish the rising cases before completely eradicating the disease.
As the story progresses, we are left with two questions hovering over our heads: when can we live normal lives again, and how would a new normal look like after everything’s been settled?
Shift in Priorities
It’s not hard to speculate on what could happen after the pandemic if we were to base our assumptions on what’s already happening in the country. A survey made by Savills UK found that 86% of their respondents believe that people are more likely to start working from home post-pandemic, which means residential markets will rise and office spaces will experience a decreasing demand.
With this, there will surely be a rising need for home offices and stable Wi-Fi connections, especially now that children are more likely to spend time at home with their parents when online learning and homeschooling becomes a norm and takes effect in August.
One thing most businesses might find interesting amid the pandemic is that there are quite a few roles in their businesses that do not require a physical presence in order to do the job well, and if that were the case, it can play a major role in lowering the budget for office spaces and make adjustments for better tools and technologies instead.
With transport services still in suspension, those without private vehicles are finding it hard to go to work despite the prevailing bike-to-work campaigns since some people live kilometers away, so cycling may not be a time-efficient option for them. Hence, it would be more advantageous for both the business and employees to keep a work-from-home setting. Otherwise, it may be more viable to rent or purchase residential units for business owners and workers to keep the distance from work and office at a minimum.
Economic Decline
In research published by the Lobien Realty Group (LRG), the economic growth in many countries has been suffering since the COVID-19 outbreak, with no exception to the Asia Pacific nations.
According to the report, China suffered a -.91 percent in economic growth when the virus started spreading in the country at the start of 2020. Singapore and Indonesia, on the other hand, suffered a reduction of .26 percent this year.
According to a World Bank report, Malaysia, Thailand, and other nations in Southeast Asia will need to come up with a strategy to gain back the losses. Meanwhile, Vietnam has a higher chance of escaping this economic decline unscathed thanks to a below-average decrease in their commercial activity.
But the Philippines’ fight against COVID-19 is still far from getting under wraps. With the Community Quarantine in Luzon as well as some other parts of the country, it will take some time before this economic turmoil starts to stabilize once more.
Oxford Economics reported that the Philippines’ projected growth declined from an estimate of 5.9 percent to 3.9 percent because of the pandemic.
Similarly, LRG states that in particular, the country’s real estate industry has been negatively affected by the COVID-19 outbreak since it had halted operations for a lot of businesses including the Business Process Outsourcing (BPO) Industry, the Philippine Offshore Gaming Operators or POGOs, as well as traditional offices, all of which occupy a large chunk of office spaces, leasing an estimated total of 2 million square meters.
The Fate of Office Markets
This year 2020, rental rates and available supplies have gone up to 900,000 square meters, with 350,000 square meters already leased to businesses in multiple industries. This, despite a 9% increase in rental rates (average of Php 100/sqm).
And yet, the great shift in priorities since the start of the pandemic has thrown off Metro Manila’s office market by a great margin. The restrictions on travel added to the effects of extended ECQ and the POGO expansion was gravely affected. The office demand for the POGO industry was projected to decline by 200,000 square meters since a forecast of USD 0.8 billion is expected to go down.
BPOs, on the other hand, are projected to scour the country to find other locations, particularly in provinces where rental rates, as well as labor costs, are lower and where new infrastructure projects by the government are underway. Other industries using traditional office setups may also shift to having some of their employees work from home to minimize overhead costs.
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As long as the outbreak is contained by 2020, LRG forecasts that the demand for office space may well improve by the following year. They predicted at least a minimum of 700,000 square meters across the Metro as long as COVID-19 is subdued right on schedule. In that case, POGO and BPO companies may restart reviving their business and office space leases by the end of the year.
The LRG report also says BPOs in the country may continue to expand even greater as global companies start to outsource their businesses while they fight against the destruction of COVID-19.
Growth in Residential Market
As building and construction projects continue, 2020 can expect an additional 15,500 residential units to rise in Metro Manila. International travel bans are likely to affect the take-up as both foreign and local investors may find it hard to move places.
Most condominium projects in process of construction target Mid-End markets with costs between Php 6-9 million. Secondary markets are projected to go down while price appreciation may remain suspended, though that’s dependent on how the market plays post-ECQ.
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In other news, travel restrictions may cause reduced demand and local unemployment may take a sharp upturn.
Property owners disposing of their assets for the purpose of liquidation could provide a good opportunity for the growth of the secondary market while new residential properties remain constant.
The Philippines can have a fighting chance against COVID-19 as long as its people, government, and businesses work together to eliminate this deadly disease. Despite the pandemic wreaking havoc to many businesses, LRG expects the Philippine economy and the real estate industry’s recovery won’t be for long.
Looking for a condo unit around Ortigas? I am Glenn Dineros, a licensed Real Estate Broker with PRC License # 5171. Reach me +63 977 852 3852 or +63 939 588 9352. You may also send your email at inquire@ortigasproperties.com(opens in new tab) so I can help you locate yours.
