Santos Knight Frank: Philippine Real Estate Sector Thrives in 2023 Post-COVID Momentum
The Philippine real estate sector is on a positive trajectory as it approaches the conclusion of 2023. Post-COVID momentum remains strong, driving robust performance across both commercial and residential segments.
This growth is underpinned by the continuous expansion of outsourcing and leasing activities within the country, which are benefiting from global inflationary pressures and cost-cutting measures.
Key Highlights:
- Manila leads the world in prime residential price growth, recording an impressive 21.2% increase.
- Office occupancy in Manila has risen to 80%, marking consistent improvement over three quarters since Q4 2022.
- The demand for leisure condos remains robust, constituting 48% of take-up in Metro Luzon, indicating a strong appetite for second homes.
- Metro Manila is expected to see the addition of 2,700 new hotel rooms by the second half of 2024, reflecting growing confidence in the hospitality sector.
- Warehouse rates in Manila have surged by 30% in the first half of 2023, demonstrating increasing demand for industrial spaces.
Manila’s Office Occupancy Reaches 80% Amidst Market Recovery
Manila’s office occupancy rate has rebounded to 80% after experiencing three consecutive quarters of consistent improvement since Q4 2022, when occupancy hit an all-time low of 75%.
Leading the charge are prime business districts such as BGC and Makati, boasting occupancy rates of 89% and 80%, respectively, within Metro Manila.
Rick Santos, Chairman & CEO of Santos Knight Frank, underscores the office market’s recovery post-COVID, attributing the uptick in leasing demand to both conventional office tenants and flexible office operators. Santos anticipates this positive momentum to persist into 2024.
In the luxury residential sector, Manila has emerged as a global frontrunner in price growth, recording an impressive 21.2% increase. Knight Frank’s Prime Global Cities Index highlights Manila’s robust performance in luxury residential prices.
Santos credits strong investor confidence during the current Ferdinand R Marcos Jr. administration for buoying the real estate market despite rising interest rates.
He notes encouraging market activity in the luxury residential space, driven by pent-up demand for prime properties, the resurgence of the residential leasing market, and limited supply, all contributing to substantial price appreciation, particularly in central business districts.
Amidst these positive developments, the government reports a 5.9% GDP growth in Q3 this year. Forecasts from the Asian Development Bank and the World Bank project further growth, estimating the Philippines’ GDP to expand by 6% and 5.6%, respectively.
The Evolving Landscape of Office Spaces: Embracing Quality and Experience
In the wake of the pandemic, the dichotomy between traditional office work and flexible remote arrangements has significantly influenced the dynamics of the office market. Companies are now strategically charting their long-term workplace strategies, considering factors such as employee preferences and operational efficiencies.
Findings from the (Y)our Space 2023 survey, a collaboration between Knight Frank and Cresa involving 350 international multi-market businesses encompassing 10 million employees worldwide, reveal that 87% of firms are planning to adopt an office-centric model in the next three years. This model encompasses various approaches, including office-first, office-only, or hybrid setups.
The shift towards an office-centric approach underscores the enduring value that physical workplaces hold in fostering collaboration, creativity, and corporate culture. While remote work has offered flexibility and adaptability during the pandemic, many businesses recognize the intrinsic benefits of a centralized office environment in nurturing team dynamics and employee engagement.
Moreover, the flight to quality in office spaces has become increasingly prevalent as companies prioritize creating environments that prioritize employee well-being and productivity. Modern offices are envisioned not merely as functional spaces but as experiential hubs that offer amenities, ergonomic designs, and innovative technologies aimed at enhancing the overall work experience.
By investing in quality office spaces, organizations aim to attract and retain top talent while reinforcing their corporate identity and brand image. These spaces serve as collaborative hubs where employees can connect, ideate, and innovate, driving organizational success and competitive advantage in a dynamic business landscape.
As the office market continues to evolve, businesses are embracing a holistic approach that integrates physical spaces with flexible work arrangements to create agile, resilient, and future-proof workplaces.
This strategic alignment between office design, employee preferences, and business objectives is poised to redefine the role of offices in the post-pandemic era, facilitating a seamless transition towards a new era of work.
Rethinking the Role of the Office: Insights from Occupiers
Inquiries about the significance of the office have highlighted its pivotal role in fostering productivity, nurturing organizational culture, facilitating collaboration, and boosting employee morale, according to respondents.
Further insights from the survey unveiled occupiers’ perceptions regarding the essential amenities required in the evolving office landscape.
Among the preferred services and amenities, food and beverage offerings emerged as the top choice, garnering nearly 17% of responses. This underscores the importance of culinary facilities in catering to employees’ dietary needs and preferences, as well as fostering social interactions and enhancing workplace satisfaction.
Occupiers also emphasized the significance of facilities supporting mental well-being, with 14.4% of respondents prioritizing such amenities. In an era marked by heightened awareness of mental health issues, providing resources and spaces that promote emotional wellness has become imperative for organizations committed to fostering a supportive and inclusive work environment.
Additionally, gym facilities were identified as a crucial component of the new office environment, with 12% of respondents recognizing the importance of fitness amenities. Incorporating onsite fitness facilities not only encourages employees to lead active lifestyles but also promotes work-life balance and contributes to overall employee health and wellness.
These findings underscore a paradigm shift in office design and amenities, reflecting a growing emphasis on holistic employee well-being and experience.
As organizations reimagine the role of the office in the post-pandemic era, integrating these amenities into workplace environments will be essential for creating spaces that support employee engagement, satisfaction, and productivity. By prioritizing the physical and mental health of their workforce, companies can cultivate a positive and thriving workplace culture that drives success and innovation in the evolving business landscape.
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