What will drive real estate forward in 2022
Continuing to tread the recovery path, the Philippine real estate (RE) sector has shown not just resilience amid pandemic-led disruptions but also stable and positive performance, as well as adaptability. Yet, with more transformations being realized and solidified in the current landscape, individual players must remain agile in meeting what markets and consumers demand.
Looking at the overall landscape, JLL Philippines Head of Research and Consultancy Janlo de los Reyes expects the RE market to move with cautious optimism in 2022, following the performance in leasing activities last year. He stresses that “significant supply expansion is expected to exert pressure in 2022 on office, retail, hospitality, and residential sectors.”
Further into foreseen trends, meanwhile, policies are seen to provide legs for RE’s future growth. These include the Philippine Economic Zone Authority (PEZA) moratorium, which is regarded as a key factor in lease activity, particularly IT-BPM occupiers, which remains a key driver of the office market; and the Retail Trade Localization Act, which is projected to impact real estate activity as the act will hopefully attract more capital for prospective retailers.
JLL also forecasts the Regional Comprehensive Economic Partnership and the amendments to the Public Services Act to provide structural changes in the market, as these are expected to attract foreign investments.
Demand for data centers is also on the rise. Carl Dizon, JLL Philippines’ Senior Analyst for Capital Markets, says that the local data center industry is gearing up for the arrival of hyperscalers. “Hyperscalers and foreign data center operators may be expecting data localization policies as this is a growing trend across Southeast Asia,” says Mr. Dizon.
Moreover, the firm also sees a rising prominence of technology in the built-up environment due to continuous shifts in demand. “Sustainability, and safety and wellness are also accelerating technology adoption across occupiers,” Mr. de los Reyes noted. JLL cites contactless systems, access cards, automated sensors, and air-con filters as examples of adopted property technology (PropTech).
Moreover, Environmental, Social, and Governance (ESG) investments are essential to success in RE.
Nix Garchitorena, JLL Philippines’ Energy & Sustainability Services manager, emphasized the importance of a continued push for actionable steps in achieving sustainability goals. Out of the top 50+ clients globally, she explained, 96% have set ambitious, publicly-stated sustainability goals; and 88% of them have set those goals but will expire by 2025. Only 19% have a clear, real estate-specific sustainability action plan, and JLL’s goal in 2022 is to narrow the gap between publicly-stated sustainability goals and specific action plans.
Demand for green certifications is also on the rise, with both new and old offices making efforts to meet this demand. There’s also a push from the regulation side, Ms. Garchitorena added, with the Securities and Exchange Commission requiring all publicly listed companies to produce an annual sustainability report.
Given these apparent demands to update buildings, asset enhancement is seen as a solution for occupiers to consider.
“Over 50% of buildings in major cities are over 20 years old and most have not been upgraded to meet post-COVID requirements. As vacancy rates increase and rental rates decline, a ‘do nothing’ approach will not preserve or enhance value,” JLL Philippines’ Head of Project Development and Services Calum Swinnerton explained, adding that health and wellness, human experience, sustainability, and technology are areas whose enhancement focuses changed since COVID-19 began.
In conclusion, JLL Philippines’ Country Head Joey Radovan says that this year will definitely be more positive than last year. “The only thing that may slow down transaction decisions is the elections since clients are interested in how policies and regulations shaping real estate may affect their operations,” said Mr. Radovan.