The local real property sector is expected to maintain its growth trajectory in the coming years, driven by huge demand for traditional office and business process outsourcing space as well as retail establishments.
Rick Santos, chairman and chief executive of real estate advisory firm CB Richard Ellis Philippines, said in a briefing Wednesday that the growth that the Philippines was seeing could not be considered a bubble as there was a lot of real demand and the sector’s fundamentals were very strong.
This up-cycle, he said, could be seen across the Asia-Pacific and not just the Philippines. The country, however, had a huge edge in terms of low lease rates as well as the presence of a strong BPO sector.
“In Hong Kong, we’re seeing record values in real estate. We’re seeing the same thing in China and Singapore. But the Philippines is more cost-effective. There’s a huge demand for office space here. Also, because of the [United States] down-cycle, the Philippines is better positioned to get more BPO business,” Santos explained.
“The local office sector has the best fundamentals, driven by BPO growth. We see office space take-up reaching more than 300,000 square meters this year. This is a huge metric for the Philippines. The country has among the lowest rental rates, the highest yields and the biggest demand. We haven’t seen this kind of demand since the time of President Ramos, pre-financial crisis,” Santos added.
Santos said growth in office space take-up, particularly for BPO operations, was expected to extend beyond Metro Manila. Even within the metropolis, there was a lot of demand for space outside the traditional locations, or the Makati and Ortigas central business districts.
CBRE vice chairman for global corporate services Joey Radovan said that even with rising lease costs, vacancy rates in most locations have plunged to low single-digit levels.
“We’re seeing sustained office demand for both BPO and traditional office space. We’re back to 2007 levels, when we saw the height of the office space take-up,” Radovan said.
In areas such as the Makati and Ortigas CBDs, where monthly rentals rates average P808 and P554.36 per square meter, respectively, Radovan said vacancy rates were down to 4.64 percent and 2.96 percent as of the second quarter, with no new developments in sight.
Quezon City and the Fort Bonifacio area in Taguig City have a huge potential to fill the supply-demand gap, he said.
In Quezon City, while the vacancy rate has gone down to just 2.79 percent at the end of the first half, an additional 105,241 square meters in new space will be completed next year.
In Fort Bonifacio, on the other hand, 198,641 square meters of leasable office space is due for completion within the year, with a number of new developments expected to be finished next year and in 2013.
“On a macroeconomic point of view, this is not a bubble. We’re seeing the start of the up-cycle. There’s real demand. There’s also a lot of potential in the retail and gaming sector,” Santos said.