Technology’s role in the future of property management

Property management as an industry thrives in developing economies like the Philippines with robust real estate markets, stable legal frameworks and regulatory oversight, and an environment ripe for turning assets into thriving investments.

Metro Manila’s decentralization and the rise of emerging cities in the provinces are spurring the industry to life. As the urbanization of provinces accelerates and real estate markets expand to those outside the capital, the demand for professional property management also rises.

Property managers — whose tasks encompass a gamut of services from the oversight and administration of daily property operations to maintaining property quality through consistent upkeep and repairs — are necessary to ensure the efficient utilization and maintenance of real estate assets, especially for property investors.

The property management industry brings structure and expertise to managing residential, commercial, and mixed-use properties, ensuring they meet modern standards of safety, sustainability, and tenant satisfaction. In a developing economy, where resources need to be maximized, effective property management can even considerably enhance the appeal and functionality of real estate, attracting investments and contributing to economic stability and growth.

It is an especially remarkable period for the industry, as the country’s onward march towards economic growth and urban development coincides with transformative breakthroughs in technology. Machine learning (ML) and artificial intelligence (AI), for instance, are at the forefront, offering unprecedented capabilities to predict and manage various aspects of property management.

Advanced property management software today utilizes big data to monitor property performance, finances, and tenant behaviors, enabling managers to identify key performance indicators and address weak areas. Meanwhile, sustainability is another critical trend reshaping the industry, as property managers increasingly focus on reducing the carbon footprint of their assets by optimizing energy consumption, improving waste management, and incorporating renewable energy resources.

In fact, many local governments across the nation are utilizing technology to improve their cities. In April, the Baguio City government said it is implementing a technology-enabled initiative titled “Project MINERVA (Monitoring of Indicators for Efficient Redevelopment and Value Assessment)” to address urban decay and promote smart city development.

“With the project’s ultimate goal of driving predictions and monitoring models for air quality, water quality, urban mobility, and tourism management, we’re able to use technology to advance our goal of becoming a truly smart city by 2027,” Baguio City Mayor Benjamin B. Magalong said.

Other cities are also turning towards the smart city route. There are the emerging hot spots, like Cebu, Davao, Bacolod, and Iloilo. Early this year, smart city developer Iveda launched a $5-million venture to execute several contracts over the next 12 months to bring smart technologies to these cities. The initiative will build on their existing work in the country and roll out AI-enabled technologies to modernize key infrastructure, such as airports, roads and sidewalks, leveraging AI tools to enhance public safety and city management.

There are also others like the City of Victorias in Negros Occidental, for another example, which announced a digital road map for the implementation of a smart city master plan merging technology and government in partnership with data science and artificial intelligence company Aboitiz Data Innovation (ADI).

Technology is revolutionizing the real estate sector as a whole; and property managers, by embracing these technological trends, can stay competitive in an industry that is poised for growth and meet the ever-evolving needs of urban living

Source: Business World

Metro Manila office rental prices decline despite improved vacancy rate

Vacancy rate in Metro Manila’s office market improved in the second quarter of 2024, yet rental prices for office spaces have continued to decline since 2023, according to real estate services and investment firm CBRE Philippines.

“This may look good on the upper hand, but zooming into the prices of each sub-district, we have been noting a trend of declines or reductions in rates as well,” CBRE Philippines Research Head Samantha Laureola said during a briefing last week. 

Metro Manila’s fair market rents (FMR), which represent the typical rental prices for office spaces, have decreased by 2% to 19% across various sub-districts from the first quarter of 2023 to the present. 

The Bay Area’s FMR fell 19% from the first quarter of 2023, followed by a 13% decrease in Makati A&B premium office buildings. Alabang also went down 10%, North Bonifacio declined 3%, and Makati Prime went down 2%.

Meanwhile, Quezon City rose 9% and McKinley inched up by 6%. Ortigas also increased by 2%, and Bonifacio Global City (BGC) rose by 0.4%.

“So lower rates, potentially more attractive lease structures for clients, higher demand, and lower vacancy overall,” she added.

The vacancy rate went down to 17.8% in the second quarter of 2024 from 19.7% in the same period last year.

CBRE also revised its initial forecasted vacancy rate from 18.8% to 22.6% by the end of the year due to the Philippine Offshore Gaming Operators (POGO) ban. 

Makati Prime had the highest FMR in the second quarter of this year at P1,289.01, followed by BGC at P1,170.88, while North Bonifacio and the Bay Area logged P1,076.88 and P702.64, respectively. 

Makati A&B recorded an FMR of P789.40, McKinley at P834.06, Ortigas at P764.39, Alabang at P671.40, and Quezon City at P735.35.

“Lower FMR for most of the major Metro Manila markets as developers continue to provide aggressive rates to spur transactions,” the firm said.

On a quarter-on-quarter basis, CBRE Philippines Director of Advisory and Transactions Services Garri Amiel Guarnes said the Bay Area had the highest reduction of 7.3% in FMR in the second quarter of 2024.

“That’s a lot to do with the transactions, government take-ups within the Bay Area, and the high number of square meters being taken by the government offices,” he said.

The office market logged 257,200 square meters (sq.m.) of office leases for the second quarter, driven by government take-ups that accounted for a 26% share. 

Some of the biggest government leases during the first half went to Filinvest, including the National Bureau of Investigation in Cyberzone Bay City Towers and the Department of Trade and Industry in Filinvest Buendia. 

Despite CBRE’s expectation that the vacancy rate by year-end will hit 43% due to the POGO ban, the Bay Area was the top district for the second quarter of 2024 with 83,400 sq.m. of leases in the country.

SERVICED OFFICE VACANCY RATE HIT 20.6%

Meanwhile, the vacancy rate of Metro Manila’s flexible market — comprising coworking spaces, serviced offices, and short-term leases — surged 20.6% to 7,000 vacant seats in the second quarter due to the opening of new sites across the area, CBRE Philippines said.

This figure was 6.75% lower than the 14% vacancy rate in the same period last year, and lower than the 17% recorded last quarter.

CBRE Senior Research Analyst Angela Joyce Sumalinog said the increase in vacancy was driven by the opening of new sites in Metro Manila, where Fort Bonifacio recorded the lowest vacancy rate at 11%.

North Bonifacio’s vacancy rate fell to 10% in the second quarter, while BGC also decreased to 10%. McKinley’s vacancy rate rose to 18%.

The vacancy rate in Makati increased to 19%, Ortigas doubled to 24%, and Quezon City reached 22%. Meanwhile, the Bay Area and Alabang saw increases to 25% and 52%, respectively.

“Another factor that we’re seeing that can affect the flex market would be comparing serviced offices versus vacated spaces with quality fit-outs. The former would often have a premium on rates of 50% to 80% over three to five years,” Ms. Sumalinog said.

CBRE reported that Metro Manila rates range from P5,000 to P36,000 per seat per month.

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Source: Business World

Direct liability of sublessor to lessor

In the Philippines, even though the sublessee is not a direct party to the contract between the lessor and the lessee, the sublessee still bears direct liability to the lessor for actions related to the use and preservation of the leased property. Specifically:

• Use and Preservation: The sublessee must adhere to the terms stipulated between the lessor and the lessee regarding the use and maintenance of the property. If the sublessee fails to do so, the lessor can take legal action directly against them.

• Exception to the Rule: While the general rule in contracts states that the sublessee can only be held liable directly to the sublessor, Article 1651 of the Civil Code provides an exception. The lessor may bring an action directly against the sublessee if they do not use and preserve the leased property in accordance with the agreement or the nature of the property.

• Rent Obligations: Additionally, the sublessee is subsidiarily liable to the lessor for any rent due from the lessee. However, this liability is limited to the amount of rent owed by the sublessee according to the terms of the sublease at the time of the lessor’s extra-judicial demand.

In summary, the sublessee has both direct liability to the lessor for property-related matters and subsidiary liability for rent obligations.

Source: Ziggurat Real Estate Corp.