PHILIPPINE office landlords face a more difficult second half as weak demand and aging buildings weigh in the marketplace, while industrial and provincial retail properties offer developers higher investment opportunities, CBRE Philippines said.
The industrial real estate services firm said the office market would wish greater than 500,000 square meters of take-up within the second half to match last 12 months’s take-up.
“We must be bracing ourselves for that,” CBRE Philippines Country Head Jie Espinosa said in the course of the firm’s second-quarter market briefing on Thursday.
He said developers are also contending with an aging office stock along with slower leasing activity.
“It’s not nearly vacated spaces anymore. Spaces that were left behind by locators. Beneath all of those vacated spaces, which could be greater than 50% of the market at this stage, you’ve got a variety of aging buildings behind them. Approaching 10 years, perhaps greater than 10 years. Numerous the developers now can have to grapple with the actual fact how do they turn into more competitive.”
He said landlords that lose tenants could face prolonged emptiness periods before securing replacements.
“If a landlord were to lose a tenant at this stage, and they’d should face the implications of waiting to backfill it, it could take almost one to 4 years for them to attend simply to have the opportunity to interchange that specific space,” he said.
Against that backdrop, Mr. Espinosa said the commercial and logistics segment stays the strongest-performing property sector and is predicted to sustain its momentum through the second half.
“Our industrial and logistics sector has had a banner first half to date. We expect that to be true for the second half as well.”
“We actually think that of the entire sectors, if I were to be a developer, that’s the actual sector where I could justify investing and I might have the opportunity to expect higher yields in comparison with the entire assets that I could probably consider,” he added.
Mr. Espinosa also cited opportunities within the retail segment, particularly in provincial markets where overseas Filipino employee (OFW) remittances proceed to support consumer spending.
“In the event you have a look at the way in which we have a look at our business, the way in which we’re attempting to diversify, we understand that retail still has a runway to go. And it’s not necessarily in National Manila.”
“The provincial markets where your remittances typically go, the vast majority of your $35.6 billion of remittances, that’s going to create structural demand in key urban areas outside of Metro Manila.”
He urged local developers to maximise idle landholdings to capture demand outside the capital.
“Most of those local developers typically require tie-downs. At the moment, they’re sitting on idle asset. They’ve a variety of land. They’re probably well land-bound. They usually should trigger the chances of those assets that they currently have,” he said.
Mr. Espinosa also urged the industry to arrange for the long-term effects of artificial intelligence (AI) on office demand and employment.
“And that’s why for this quarter, the query that we’re posing out there is, how will we survive AI?”
He said the Philippines must ensure its workforce stays competitive as AI creates latest industries and changes office space requirements.
“Will we have the opportunity to be competitive enough to backfill all of those 1.7 million square meters that we currently have, not only in Metro Manila, but in provincial locations? Is the labor that we currently have lying in wait?”
“I believe those are the more essential questions frame that we want to reply,” he added. — Juliana Chloe A. Gonzales