Leechiu Property Consultants (LPC) has released their Q3 2024 report on the Philippine real estate market. According to their data, the presidential order banning POGOs has resulted in "approximately 50,000 square meters being vacated by the POGO industry."
LPC states that this has increased the total new vacant space for Q3 2024 to 378,000 square meters, a 21% increase year-over-year, yet the industry still occupies about 500,000 square meters of rental space. LPC notes that the available office building supply is expected to decrease by up to 50% by 2025, which will lead to a decline in vacancy rates.
The company also outlined the condominium market in Metro Manila.
LPC states that due to high interest rates and "changes in buyer preferences," there is currently a 29-month oversupply of condominium units in Metro Manila. A 29-month oversupply means that even if no new units were built starting today, it would take until April 2027 to sell all available units at current sales prices.
LPC states that the normal inventory of condominiums in Metro Manila is about 12 months. With decreasing interest and inflation rates, the condominium market is expected to improve. MB Bottom Line: Next month's Q3 earnings report for our real estate investment trust will be interesting.
The condition of the commercial leasing market explains why real estate investment trusts that failed to diversify their assets from commercial leases (such as DDMP [DDMPR 1.07 units; 90% average trading volume] and Filinvest REIT [FILRT 3.05, down 4.4%; 95% average trading volume]) are significantly lagging behind their diversified peers.
In my view, hotels seem to be the new gold rush for real estate developers in the POGO sector, so I am increasingly focused on how top developers are addressing tourism in their long-term plans. Currently, we are in the honeymoon phase of hotel development, where the only concern is "more, more, more," but I am interested to see which developers understand this market and become long-term players. It is still too early to conclude.
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