The Philippine real estate market is expected to sustain its robust growth this year, driven largely by a strong economy and the continued entry and expansion of outsourcing companies, growing developments outside central business districts.
CBRE Philippines chair and founder Rick M. Santos said business process outsourcing (BPO) firms were seen to continue to prosper in the coming years given the educated young labor force, low cost of labor, notable customer service, low rental rate and high yield rate that would provide a thriving environment for foreign investors.
“The Philippines is becoming one of the most preferred outsourcing destinations of American and European companies which are struggling to maintain employment levels in their mother countries,” Santos said.
He noted the strong interest from multinational companies in setting up shared services in the country on the back of a conducive business environment. A number of these companies are focusing more on precommitting space in anticipation of the programmed increase in the number of their employees in the coming years.
According to CBRE Philippines, BPO companies have started to move where the captive labor is. While more than 70 percent of BPO jobs today are located in Metro Manila, “about 62 percent has already been absorbed.” These companies are locating outside Metro Manila where there is more untapped labor and where they have less competition.
It noted that many of the national developers have accumulated real estate and positioned themselves in key locations outside Metro Manila to provide supply and secure market share specifically in the top outsourcing destinations of the country. These destinations offer significantly lower rents due to lower cost of land and labor, making them cost-effective expansion sites.
“Metro Manila has always been the country’s center of development but it is now spreading out. Areas outside Metro Manila such as Laguna, Cavite, Bulacan, Pampanga, Cebu, Bacolod, Iloilo, Davao, Cagayan De Oro and Zamboanga are gaining investments for their economic potential. Real estate development is beginning to grow at a faster rate in these secondary sites as returns on investment have been becoming quite favorable,” Santos explained.
“Developments in these secondary sites were initially limited to local developers. Over the past several years, however, national developers started to enter these sites on a growing scale. This can be seen as a positive situation as this encourages local developers to step up in terms of putting up better quality buildings and structures. This in general will promote growth in terms of employment and other opportunities as well as providing better facilities for the local populace,” he added.
In the meantime, Santos remained optimistic that even with the change in administration, the Philippines would “continue with its bullish economic trajectory given that the incoming administration maintains the momentum as driven by current macroeconomic policies and fundamentals.”
“The decentralization path to be pursued by President-elect (Rodrigo) Duterte will accelerate economic growth in areas outside the National Capital Region which will provide a more inclusive growth for the nation. The boost in infrastructure as expressed by President Duterte, which includes an addition of four railway projects which is targeted to connect Luzon to Mindanao, is sure to diversity the points of development of the country from its existing concentration in Metro Manila to a wider spread across the Philippines,” Santos said.
He said more investors were expected to enter the country as the crime rate was seen to drop given the President-elect’s reputation with regards to law and order in Davao and his plans to implement the same discipline throughout the country.