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PH property sector to be driven by hospitality and retail in 2023

The hospitality and retail industries are expected to have a positive impact on the Philippine real estate market this year, according to real estate services company Santos Knight Frank (SKF).

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Rick Santos, chairman and CEO of SKF, stated that due to the loosening of coronavirus disease 2019 (Covid-19) limitations and increased mobility, the country’s retail and hotel industries are rebounding more quickly than any other property sector.

“During the epidemic, the real estate sectors of brick-and-mortar retail and hotels were among those that were most badly impacted. We are witnessing a rebound and ‘unfreezing’ of market activity as well as the growth and expansion of participants in these areas now that travel and mobility restrictions have been eased, he said.

Santos predicted that this year’s recovery in the hotel and lodging industry will be aided by the restart of foreign travel and China’s relaxation of its Covid-19 policy.

Thus, he said, “revenge is traveling.”

This year, the Department of Tourism hopes to draw 4.8 million tourists from abroad, with Chinese tourists being one of its top targets.

More than 1.78 million people from China came here in 2019. For their vacation, these Chinese visitors spent more than USD 2.3 billion in the Philippines.

Almost 2.65 million tourists visited the Philippines last year, a significant decrease from the nearly 8.26 million tourists that visited before Covid.

Santos announced that 2,692 more hotel rooms will be opened in Metro Manila alone between 2023 and 2024 to accommodate this year’s anticipated foreign guests.

He claimed that the sector will benefit from the reintroduction of in-person events this year.

This is evident from the inflation data, which shows that one of the biggest drivers of inflation in January 2023 was the restaurant and lodging services industry.

Santos added that the decision by the Marcos administration not to impose any lockdowns during the epidemic and to keep the economy open bolstered trust in the retail sector.

According to Morgan McGilvray, senior director for occupier services at SKF, the occupancy rate of retail spaces in Metro Manila by the end of 2022 was 93%, which is very close to the pre-pandemic level of 96 percent.

In 2022, he claimed, 4.5 million square meters (sqm) of retail space was occupied.

The need for office space is being driven by the information technology and business process management (IT-BPM) industry, according to McGilvray, who also stated that the forecast for the office property sector is positive this year.

According to him, the rising inflation in the US and other countries is a “positive development” for the Filipino IT-BPM industry since it means American businesses are considering cost-cutting measures that may involve setting up back offices abroad.

According to McGilvray, the Philippines continues to be a popular location for IT-BPM investments.

Due to increased outsourcing demands from developed economies, the availability of high-quality office space, and businesses changing how they set up their workspaces, we anticipate more leasing activity this year. We expect to see a net positive take-up overall in 2023, mostly driven by the BPO industry, even if we will continue to see some shrinkage of footprints for Philippine headquarter corporations.

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