Property developers in the country are beginning to divest their non-core assets in their bid to have leaner balance sheets, real estate consultant Property Interactive Marketing Enterprise Realty Corp. (Prime Philippines) said.
As of said, it said asset rationalization has become close to a standard practice among the sector’s biggest names in both institutional and mid-sized developers.
‘This has exposed a bifurcation between highly leveraged and financially stable entities, with the former pushing ‘good deal’ acquisitions and the latter divesting properties to service debts,’ Prime said. The sellers, some of which have acquired their properties during 2018 to 2019, are likely to dispose these assets at a loss as commercial land values have reverted to 2017 levels. This was compounded by elevated taxation that stemmed from zonal values that now exceeded market prices between 10 percent to 20 percent.
‘Headwinds are real. Inflation shocks, slowing growth, political noise and environmental risk continue to weigh on sentiment.’
Debt financing has also become harder to secure for those who can afford to look for asset acquisition, renovate developments or service existing debt. Meanwhile, real estate non-performing loan ratios have exceeded the overall industry rate, as banks become cautious on extending credit to the property companies.
Nationwide demand for office spaces in the first half fell 15 percent, as the share of business process outsourcing (BPO) sector dropped more than 21 percent. The BPOs were overtaken by government agencies and traditional firms mostly from professional services and wholesale and retail. Prime said the drop in BPO’s share was caused by the resolution to raise the allowable work-from-home scheme to 90 percent from the previous 50 percent, while industry estimates puts automation from artificial intelligence exposure at about 80 percent for customer service roles and 75 percent for data processing.
‘These temporary shocks should not be read as a severe hallmark for full retrenchment of the BPO labor base. The evolution of artificial intelligence is proving as a much as a source of new job creation as it is a driver of displacement.’
The industry, it said, still expects close to 2 million jobs and $42 billion in export revenues by the end of the year. The demand is shifting toward analytics, business intelligence, program and project management, and other highly-technical work.