In post-COVID-19 lockdown scenario, half of Philippine restaurants might close shop, work-from-home (WFH) arrangements may not be suitable for many businesses and a number of upper-middle residential condominium could suffer reduction in value, according to property consultant David Leechiu.
Meanwhile, office property segment is expected to fare well, while low-density luxury hotels and resorts may experience a boom in the “new normal” due to affluent consumers looking for relief from months of quarantine restrictions once businesses gradually reopen.
During a virtual forum hosted by Thames International, Leechiu said even before the COVID-19 crisis, 20 to 30 percent of new restaurants were unable to survive in the first two years because of high competition and low-margins.
Some landlords have already agreed to waive rental fees for restaurants that did not operate during the lockdown period. Leechiu noted that these businesses still paid the salaries of their staff. These overhead costs constitute 40 to 50 percent of costs.
“If your revenues are anywhere between 40% to 60% down or zero, still maintaining 50% to 60% of expenses, very soon you have to make a capital call and if you don’t make the capital call, your only option is to close,” Leechiu said.
Leechiu said two decades ago food and beverage constituted only 20% of most shopping malls across the globe. The mix has now been skewed to 60% in favor of this segment as fashion houses streamlined.
With so many players in the market, Leechiu said the tough environment caused by COVID-19 became the tipping point.
“The good side is it will open up opportunities for more capital to enter the food business,” Leechiu said, noting that there were other groups wanting to bring in more brands but could not do so in the past because of cutthroat competition and expensive rents.
On the office property, Leechiu said WFH arrangements might not be sustainable on a massive scale.
He added that multinational companies had to send jobs to the Philippines or India to save costs in this challenging global economic environment.
On the residential sector, Leechiu said that if all lockdown measures were lifted before July, there might be time to stabilize the residential condominium market. But beyond July, Leechiu said the smaller banks could start calling on unpaid loans, resulting in a “mass liquidation” of assets. He sees the upper-middle income segment—or those with units priced within P15 to P30 million —becoming most vulnerable.
In the tourism segment, Leechiu said the higher-end segment of the hospitality sector might be the first to recover as these low-density property developments would likely be the most faithful to physical distancing policies.