Among portfolios that took a hit were holdings of state pension funds Government Service Insurance System and Social Security System, which saw a P470-million paper loss on Tuesday from their investments in 11 of the country’s biggest developers and their REIT subsidiaries.
“There will probably be a knee-jerk reaction with selling concentrated on the most exposed stocks,” Abacus Securities’ research head Nicky Franco said on Tuesday.
These stocks with higher exposure included DDMP REIT, DoubleDragon Corp., Filinvest Land, and Megaworld Corp., he said.
Office vacancies to rise
Philippine Offshore Gaming Operators (POGO) occupy around 1 million square meters of office space.
This will raise the overall office vacancy rate from the current level of 17 percent, according to Leechiu Property Consultants.
Mikko Barranda, director for corporate leasing at LPC, told InsiderPH that the POGO ban could delay the full absorption of new supply, which continues to grow, until 2028.
Impact priced in?
"The ban has adverse impact in terms of reduced employment for locals in POGO operations, reduced demand for real estate rentals/leases forresidential, office, and commercial properties and even purchases ofresidential condominium units," said Michael Ricafort, chief economist at the Rizal Commercial Banking Corp.
"The ban is somewhat expected on POGOs, as could have already been priced in by the markets beforehand, also based on the position/clamorby some local business groups recently," he added.
Rate cuts to offset slump
While the POGO ban adds pressure to office vacancies, residential sales could offset the slowdown once interest rates start to decline.
“Remember that the office vacancy rate in Metro Manila was only 3-4 percent in 2019 and ballooned to the high teens last year,” Franco said.
“It resulted in stagnant lease rates and revenues for the major developers but there has been no property crisis. So even if occupancy levels fall another 5-6 percent by yearend, it will be a setback but it should be more than offset by prospects for better residential sales as interest rates fall,” he added.
His top picks are SM Prime Holdings, Robinsons Land Corp., RL Commercial REIT, and Citicore Energy REIT.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
