By Rizal Raoul Reyes
According to LRG CEO Sheila Lobien, the Philippine real estate industry is very sensitive to the overall economic performance of the country. When the Asian Development Bank’s (ADB) made a forecast that the country’s 2022 GDP will grow from 6.0 percent in April to 6.5 percent in September, the real estate industry took it positively.
She said the increase becomes even more special as it showed divergence with the downward adjustment of GDP growth for Asia from 5.2 percent in April 2022 to 4.3 percent in September. The Philippines is expected to overshoot its 6.5 percent to 7.5 percent GDP target as a result of its Q3 GDP performance of 7.6 percent despite economic headwinds and high inflation. For 2023, the Philippines is again expected to grow by 6.3 percent, one of the highest growth rates in the region.
“LRG believes the strong connection between the overall economy and the real-estate industry. When the economic outlook improves and GDP increases, the real-estate industry also rallies to the point where a bull market prevails for years,” Lobien said.
“LRG expects the warehouse and storage sector to continue its growth trajectory for years to come. During the pandemic, this is the only segment of the real-estate industry which did not contract- posting an 8.2-percent growth, primarily driven by the doubling of e-Commerce revenue in a span of two years—from P600 billion in 2020 to a projected P1.2 trillion industry in 2022,” Lobien added.
Meanwhile, Lobien said the Real Estate Investment Trusts (REITs) made investors smile as it delivered significantly on their promised dividend yield with 6.750 percent actual versus 6.768 percent expected dividend yield and are expected to outperform stocks until the majority of retail investors increase their stock exposure amid inflation concerns. She said the office space market lease-out rate has also improved as of 3Q 2022 (versus 2022) and is expected to further recover in 2023, underscored by probable decrease in rental rates as landlords push vacant spaces in the market and the increased demand due to economic recovery and back-to-work actions of most companies.
“LRG always has and will always continue to keep tabs on the economic factors affecting the real-estate market. In addition to monitoring vacancy rate, rent, and, demand & supply, LRG also monitors GDP from construction; the number of building permits; real-estate loans; and even interest rates vis-à-vis the movements of several economic indicators to have a more holistic feel of the industry,” Lobien explained.
With the economy expected to recover in 2023, Lobien said: “Our fearless forecast: another frenetic bull run in the real estate market is expected after its recovery in 2023.”