Hybrid work, REITs and IT-BPO paving way for PH RE recovery

Asia Pacific’s commercial property market will stabilize further in 2022 as investment and leasing activities are poised to accelerate.

Global real estate consultant JLL (NYSE: JLL) expects 2022 investment volumes to be around US$200 billion or over 15% above the full-year estimate for 2021, which currently stands at US$162-169 billion. This forecast is despite renewed uncertainty over the societal and economic impact of Covid-19.

According to JLL, in 2022 several themes will fuel heightened investment activity and support ongoing recovery in leasing across asset classes, including a stronger office market, high demand for modern logistics facilities, and the continued growth of alternative sectors such as data centers and life sciences. 

“Asia Pacific’s real estate markets will enter 2022 stronger than a year earlier, as investors maintain their bullishness and leasing activity continues to further recover,” says Anthony Couse, Chief Executive Officer, Asia Pacific, JLL.

“It’s clear that the path to economic recovery is not a straight one, but we’re hearing from our clients that they have confidence in the future of office-based work. Investor sentiment is positive though uncertainty remains the reality and will be factored into any decision-making in the year ahead,” says Couse.

Joey Radovan, Vice Chairman, JLL Philippines, says that this insight is mirrored in the Philippines. “Positive outlook on commercial real estate capital markets was boosted by Real Estate Investment Trusts (REIT) launches in 2021. There is no doubt that the outlook for the local real estate capital markets will be more robust as the pandemic situation improves next year.”

JLL forecasts the volume of capital targeting real estate will remain steady throughout 2022 with investors deploying more funds towards opportunistic investments in markets including China and Japan.

“In the Philippines, we are maintaining our view of gradual real estate recovery between now and middle of 2022. This will be in tandem with the pace of economic rebound over the coming quarters and influenced by the policy landscape regarding work from home and the national elections,” says Janlo de los Reyes, Head of Research and Consulting, JLL Philippines.

In 2022, Asia Pacific’s office market will add 6.9 million sqm in supply, up 13% from this year. JLL predicts net absorption levels to rise by 20% next year, driven by expansion of financial, technology and flexible space operators.

The office market in the Philippines is projected to be in full recovery mode by the 2nd half of 2022. Indicators on the Information Technology and Business Process Outsourcing (IT-BPO) community going ahead with expansion plans have gained traction, owing to the view that there should be a more positive outlook given the progress on our vaccination program. “The IT-BPO industry will remain resilient and will continue to pave the way for long-term office space demand across the country being driven by the country’s attractive labor demographics,” says Radovan.

Prime logistics stock is set to grow by 17% between 2021 and 2022, the fastest pace of annual growth on record, with 20.8 million sqm of new supply expected to be delivered. As a result of increasing stock and portfolio reallocations, JLL forecasts logistics investment to rise to US$60 billion annually by 2025.

Investors and developers have ramped up their capabilities under the logistics and industrial space, which may likely remain a fixture in portfolios moving forward. “We have seen demand for residential properties outside Metro Manila pick up not only from local buyers but also from high-net-worth individuals from Metro Manila who are seeking to relocate to less dense areas in relative close proximity to the metro,” says de los Reyes.

Hotel investments are also expected to rise by up to 30% in 2022, crossing the US$9 billion threshold next year, as confidence builds in the hospitality sector.

Investor and occupier demand for data centres will continue to grow in 2022. The hyperscale cloud market will expand by 400% from US$37 billion in 2021 to US$179 billion* by 2026, creating ongoing demand for real estate to support expansion.

While the life science sector remains niche for some Asia Pacific investors, the region will offer diverse opportunities in terms of location and asset class as occupier demand continues to grow in 2022.

“The real estate market in Asia Pacific has faced unprecedented challenges in 2021. While 2022 will come with some risks, investors with a long-term view remain confident in the secular trends that will drive demand in this region: ongoing urbanization; increasing prosperity and a growing middle class; and the acceleration of e-commerce. All of these point to opportunities for investors,” says Roddy Allan, Chief Research Officer, Asia Pacific, JLL.

“There are also opportunities for building owners to retrofit their buildings to make it more sustainable as the demand for more green buildings will continue. It would not just be focused on the asset being traditionally “green”, it will also have to be sustainable in terms of operations,” Radovan concludes.

Read more of JLL’s observations in the 2022 Asia Pacific Outlook here.

JLL has been operating in the Philippines since 1997 as a 100% wholly owned entity and currently manages about 4.4 million square meters of real estate with a workforce of over 1,100 employees. With more than two decades of local expertise working hand-in-hand with its global legacy, JLL provides to the Philippine real estate market an unparalleled synergy of services with a strong commitment to achieve real estate ambitions through future-ready approaches. For further information, visit http://www.jll.com.ph/.

* Sourced from the Structured Research Market Share Series” Hyperscale Cloud, Q2 2021