THE number of office spaces that will be built in the Philippines will go down in the next three to five years, mainly due to higher building and construction costs and decreasing demand for office spaces.
During The Manila Times' Online Business Forum titled 'State of the Art in Real Estate' on Wednesday, Sheila Lobien, chief executive officer of Lobien Realty Group, highlighted the state of the country's property sector and the challenges it currently faces. Among these are the increasing cost of construction materials and the decreasing demand for office space acquisition and rentals.
'In terms of supply or the number of office space that we'll build into the market, you'll see that in the next three years, it will go down primarily because building costs are rising, plus the demand for office space is also not that high,' Lobien said.
Based on the data from the Philippine Statistics Authority, the retail prices of construction materials in the National Capital Region (NCR) last February grew at their fastest pace in more than five years, amid supply chain constraints.
PSA said Metro Manila's construction materials retail price index (CMRPI) quickened to 3.3 percent in February from 3 percent in January. This was higher than the 1.1 percent pace in the same month in 2021. This was the highest year-on-year growth for building materials prices in NCR in more than five years, or since the 3.5 percent in November 2016. The February figure also matched the 3.3 percent in July 2018.
'Quickly, you'll see that the number of office spaces that will be built in the next three or five years will go down and the likes of Megaworld, Ayala, and all of the big boys are also very cautious right now. As you know, building costs can be managed if there is a strong demand,' she added.
'So, it's always a question of demand, pricing, etc. If the demand is high, then even though the cost is also moving up, the construction of office spaces will also move up. But if demand is not that high, then it will also go down,' she added.
Meanwhile, Lobien noted that there will be a sustained market for residential spaces as more people search for and invest in residential homes amid the pandemic.
'Probably, we'll go on a residential base because the demand for residential all over the Philippines is still there and very much growing. People will always need a place to stay, so they either buy a next home, a bigger home, or a condo in the city to avoid the traffic,' Lobien stated.
Moreover, she noted that the work-from-home arrangement has also influenced the expected increase in the demand for various types of housing units, especially townhouses and condo units across the country.
Residential property prices in the Philippines increased by 4.9 percent year on year in the fourth quarter of 2021, as it was ideal for consumers to purchase during this period, according to Bangko Sentral ng Pilipinas (BSP).
The Residential Real Estate Price Index (RREPI) showed that prices rose by 1.1 percent compared to their level in the third quarter of last year.
During the fourth quarter, prices in Metro Manila increased by 5 percent year on year, but slower compared to the 11.4 percent yearly growth from the third quarter.
Meanwhile, prices outside the Metro were stable at 5 percent.
Lobien, however, stressed that companies can always shift to building other properties that are based on the latest market trends to offset the high costs of construction materials and operations.
'There are other places now that can be pushed or moved when the price of new construction moves up. Landlords developers will also think of wetland first and where or which segment is being demanded, and then focus on what to build, either hotels if the hotel is more in demand at the moment or condominiums or affordable housing,' Lobien explained.
Lobien Realty Group is a full-service real estate consultancy and property investments strategy firm engaged in project leasing, tenant solutions and property sale and acquisition.