SKF bullish on property sector’s prospects

Real estate agency Santos Knight Frank (SKF) on Tuesday said the country’s commercial real estate market is now recovering following the easing of quarantine restrictions.

SKF Chairman and CEO Rick Santos said pent-up consumer demand, high vaccination rates, and workers’ return to office contributed to the recovery of the brick-and-mortar retail, a sector that was severely hit during the height of pandemic lockdowns.

Santos added that a lot of consumers reported a higher level of confidence in the second quarter as seen in their revenge spending. The latest survey by the Bangko Sentral ng Pilipinas also indicated that consumers have a better outlook for the rest of the year despite rising inflation.

Food and beverage and clothing apparel account for 32.7 percent and 32.1 percent, respectively, of all upcoming stores in Metro Manila’s retail sector.

Santos said SKF remains bullish on the country’s property sector and is predicting a “significant recovery” in the next two to three years as demand for commercial and residential property returns.

He said there is also “a shared optimism” in the office market. “Firstly, as Western companies continue to cut costs, more outsourcing can be expected to come to the Philippines, spurring office demand for the rest of the year.”

“Secondly, Peza-registered companies may need more office space in order to comply with Fiscal Incentives Review Board requirements. Peza companies that are currently operating under 70 percent workfrom-office rules may need to prepare for 90 percent work-from-office by September, which may in turn require them to lease more office space.”

He said the Philippines, along with India, South Korea, Singapore, and most of asia, will likely see more workers returning to office than developed economies in the West.

“Q2 was the first quarter for many employees to return to the office. With that, we also saw an increase in leasing activity for the first time in a while. However, with 228,500 sqm of new office space also added to the market in Q2, the Metro Manila vacancy rate still rose to 23 percent,” said Morgan Mcgilvray, SKF Senior Director, Occupier Strategy & Solutions.

The weighted average lease rate grew by a modest 0.7 percent in the second quarter to P1,089 from P1,082 in the previous quarter.