RE professionals should prepare for 2022 by following trends that speak these three-- flexibility, convenience and resiliency--as these are the defining themes that came out of the annual Emerging Trends in Real Estate 2022 report, released last week by PwC and the Urban Land Institute.
In the Philippines where we are heavily hit by continuous lockdowns, the economy has suffered tremendously bringing businesses to negative growth and some even to closure. Although of course there were a few that performed well during the pandemic, it is important to note that most of those who suffered are the SMEs. In a land of a big gap between rich and poor, this is of course not a good indication. So how do we move forward?
The report starts talking about optimism as the survey they conducted turned an 84% positive thinking respondents who believe the 2022 will be a better year. This even surpassed the 79% rating from 2019 before the pandemic hit. According to the real estate director of research of PWC--Andrew Warren--"It remains to be seen whether that buoyancy is a “sugar high” bounce-back fueled by the massive federal stimulus pumped into the U.S. economy".
What is clear is that when the country reaches its “next normal,” it will not be the same. “Things will change,” Warren said. In particular, the desire for flexibility and convenience will drive change in real estate not only in 2022, but also over the next decade. Trends identified in the report, including the potential to work anywhere and live anywhere, could transform buildings, markets, and investment decisions.
Philippine Office Market
The office vacancy reported this year by Cushman and Wakefield was at 14.4% across business districts. The earlier report of KMC Savills after the 1st half of the year was at 13%. The continuous rise of the office vacancy rate may be worrisome but the growing pent-up demand from the west to boost the economy may cause a good upswing in our country and should be something to look forward to. Economies will be working hard to fight the global crisis. Optimism can really help boost fighting spirits.
Back in the report, they quote Amy Price--president and co-head of the U.S investment management business at BentallGreenOak, “Overall, what jumps out here is optimism. It’s very clear that, not only do we feel good about the sugar rush but also looking forward,”.
Currently, in the country, we are experiencing a downtrend on daily recorded cases as vaccination has been steadily gaining with an approximate 40% recorded of completed vaccinations. In a briefing for foreign chambers of commerce on November 26, Finance Secretary Carlos Dominguez 3rd told economic managers that the economy is beginning to recover and is ready to accommodate more investments. The GDP recorded in the third quarter was at 7.1% and he advised that "this is a good time to expand collaboration as our countries are emerging from the pandemic, led by the adept public policy and strong private sector initiatives".
Should such efforts continue from both the government and the people, we can be optimistic with a reason.
Now how do we advise clients in transactions or those planning to make a move in the coming year? Well first, is to not worry but just plan carefully. These trends that are forecasted to happen in the United States can be used as a guide here in the Philippines as our economies are heavily intertwined and not to mention, real-estate wise, our practice is very heavily influenced by them as well.
Flexibility For both occupiers and landlords, rethinking how to do business with each other is necessary so that new relationships will be fostered. The report noted that although things have changed on how real estate is utilized, there is a high chance that it will still go back to how things are as long as economic players help each other as time will be playing its part to test everyone's patience and sustainability.
For the Philippine arena, with offices being vacated, landlords are seen mitigating the effects by pulling down their rates to attract new occupiers and as well as to retain occupiers. As the market has shifted from landlords' to tenants', it is now the time for landlords to give back and provide better concessions to stay competitive.
A thing to always keep in mind is that most of them are still trying to go through. Even if it is a tenants' market, it does not necessarily mean that they are winning. Remember that the pandemic is not yet over and that they are probably still trying to stay afloat amidst it all.
Flexible terms such as a lesser minimum lease term requirement or lesser penalties in pre-termination are favorable for everyone in this type of market where uncertainties are lingering.
Convenience Working from home may be here to stay but it is still a preference to have a dedicated place of work for most. This is where coworking spaces and serviced offices come in as they provide more access points for workers to come and do their work. For example, Regus--one of the leading serviced office providers in the country--who has more than 30 sites across business districts would be a good option for office occupiers whose employees are on hybrid work. These employees can choose to stay at home and go to the nearest center of their choice if they want to work rather than having only one office to go to. Convenience matters a whole lot especially if you are battling the risks of infection in every step of your travel.
Resiliency Staying resilient in this global pandemic will speak for everyone's future. Landlords with better processes in managing the pandemic will definitely reap the benefits of having better tenant retention than others. Aside from mere processes, an adaptation of new technology or proptech also proved to be a must-have for real estate players--both landlords and occupiers. The use of data in analyzing space utilization was realized to be of high importance when deciding occupiers' current and future real estate requirements. Conclusively, creating better processes through the use of technology leads to improved resiliency of companies as they are better informed to execute their business plans amidst crisis and manage their business continuity.
Office Pro Philippines is a Corporate Real Estate Consultancy and Service Solutions firm that is focused on the OFFICE SPACE.