Lease rates for industrial land seen rising

Demand for industrial estate is improving in the Philippines as manufacturing activities start to pick up given the country’s good macroeconomic fundamentals, property consulting firm Colliers International said.

Based on data gathered by Colliers for the second half of 2013, the average industrial vacancy rates in Luzon’s industrial hubs such as Cavite, Laguna and Batangas had declined by more than 3 percent from the previous semester while the average land leasehold rate for the period rose by 16.7 percent.

“The consistent high growth in domestic spending will increase production levels, driving lease rates for warehouses to grow by 4 to 5 percent in the next 12 months,” Colliers said in its latest report.

At present, the average land leasehold rate is P35 per square meter per month.

Reflective of the improving demand, Colliers said all locations posted a decline in vacancy rates, with the ratio in Batangas declining by 27 percent from the level in the previous semester to 16.9 percent.

Romeo Arahan, research analyst at Colliers Philippines, said in a recent briefing that strong demand for industrial property was coming from light manufacturing, accounting and logistics. He said this might be driven by external forces such as the rising wages in China.

“Manufacturers are looking for alternatives and because of the Philippines’ stellar performance and investment grade rating, the country is now highlighted as an alternative location for their operations,” he said.

Arahan said one big shoe manufacturer, which used to have a factory in the Philippines but relocated to China 10 years ago, was now planning to move back to the Philippines. “That’s how this particular manufacturer sees the potential,” he said.

Based on Colliers’ report, Batangas had become a prominent manufacturing destination due to its proximity to an international port and easy access to Metro Manila via the Star Tollway and South Luzon Expressway.

Colliers added that Cavite and Laguna remained “highly preferred” as respective vacancy rates declined to 16.3 percent and 6 percent in the second semester of 2013 from 18.6 percent and 6.66 percent in the first semester.

The improving demand has contributed to an increase in the average land value in Cavite, Laguna and Batangas by 2.6 percent to P3,900 per square meter, the report said.

Colliers forecasts that land values will grow by 5 percent in the next 12 months as new supply will temper a sharp increase in prices.

For the second semester of 2013, the number of manufacturing economic zones registered with the Philippine Economic Zone Authority (Peza) increased by only 0.8 percent to 55,803 hectares compared to 55,354 hectares in the previous period.