DESPITE the slowdown in office space take up caused by the pandemic, commercial property values in the central business districts (CBDs) remained steady because of the low supply of land in these locations.
Sheila Lobien, chief executive officer of the Lobien Realty Group (LRG) said the company has not observed any significant decline in land values in CBDs notwithstanding Covid-19.
According to LRG, the selling prices in the CBDs are as follows: Makati P400,000 to P1,000,000; Taguig P400,000 to P1,000,000; Pasig P280,000 to P350,000; Mandaluyong P120,000 to P230,000; Quezon City P170,000 to P230,000; Alabang P250,000 to P400,000; and Bay City P300,000 to P500,000.
“Most of the landowners are also expected to comfortably survive the pandemic because of the robustness of their companies and the possibility that they have secure cash positions,” Lobien said.
Moreover, Lobien said property owners remain bullish because they expect the pandemic to be temporary as the vaccines become available leading to an economic recovery. Although there are some landowners who “may have been already highly leveraged pre-pandemic who may need to sell properties at lower prices for debt servicing,” she said they are quite few and not yet currently in the radar.
Moreover, LRG recently reported that there is an 8 percent vacancy of office spaces across all Metro Manila business districts. In its latest report, LRG pointed out that the supply of office space in the 4th quarter of 2020 had a total of 739,312 sq m. With this number, about 57.59 percent or 425,778.83 sq m is occupied or remains leased, with available remaining supply at 313,533.17 sq m.
Lobien said current value of average rent in February last year dropped 3 percent from P1,160 to P1,120 per sq m. She added the decline in rental rates was prevented because of Philippine offshore gaming operators’ (POGOs) usual one-year advance rent and deposits required by landlords of POGO tenants, as well as the norm that tenants and landlords wait for the renewal period to renegotiate rental rates. “LRG expects renegotiated rental rates to remain in their current level or at the minimum, become lower by 10 percent,” it said.
Cities that have been affected by the drop in rental rates are Makati, Taguig and Bay Area—the areas which had the highest asking rates for the past three years. Moreover, LRG said the Grade A buildings in these CBDs have already shown an 8-percent to 11-percent decrease from their rental rates for the same period in 2020.
In Metro Manila’s CBDs, LRG cited three major factors that affected its rental rates—1) Closure of offices of many tenants, led by POGOs who exited the country in droves. 2) The postponement of new and current companies’ start of operations and expansion plans—and the resulting space-taking based on these activities—have almost halted; and 3) The health risk has forced many companies to temporarily rely on work from home arrangements, reducing any need for office space.
To address the challenge, Lobien said office property owners in CBDs have done the following to stay afloat: 1) They are not forcing the issue and are patient with the current situation; 2) They have slowed down some planned construction in anticipation of high vacancy rates and lower rental rates; and 3) They have become more flexible in their rental expectations and are actually giving rental discounts to existing tenants and/or offering lower rents to new ones which can be as high as 20-percent off versus pre- pandemic rates.
“Most are also offering their office spaces with furniture which were left in good condition by the previous tenants. LRG advises that prospective tenants should already start scouting for their preferred CBD, buildings and office cuts to maximize the current situation,” she said.
Meanwhile, the pandemic has created a hurly-burly scenario in property sector, according to Cushman and Wakefield director and head of research Claro Cordero Jr. This saw the emergence of new trends and the acceleration of existing ones such as the remote working concept, flexible working setup, and preference toward online shopping that are seen to influence the future landscape of the property sector post-pandemic. “These trends are expected to help evolve the supply and demand for real-estate offerings, both in the short and the long term,” he said.