Trends to watch out for in 2017 | Inquirer Business

Trends to watch out for in 2017

Rosy growth prospects
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/ 01:26 AM December 31, 2016

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What’s in store for real estate developers in 2017?

If they were to mirror the optimism held by some of the biggest business groups about the country’s prospects for next year, then an equally robust property market may be expected on the back of a strong economic growth, a growing knowledge process outsourcing (KPO) industry, aggressive infrastructure spending by the incumbent Duterte administration, and the sustained private sector confidence.


“We, at Colliers International Philippines, expect sustained economic growth in the next 12 months and this growth should sustain the growth of the property market,” said Joey Roi Bondoc, research manager at the said property consultancy firm.


In an interview with Inquirer Property, Bondoc noted that the office, retail, and industrial segments performed well in 2016 and these sectors will likely similarly drive growth in 2017.

He likewise disclosed that there a number of trends and growth drivers that the industry players should watch out for as these may offer highly lucrative opportunities for further growth and expansion of their respective businesses.

According to Bondoc, these trends included the expansion of mixed-use developments outside Metro Manila as these are expected to offer better value proposition than the standalone developments; as well as the development of meetings, incentives, conventions and exhibitions (MICE) and leisure facilities.

The year 2017 may further see the expansion of alternative industrial hubs; more strategic landbanking within the vicinity of crucial infrastructure projects ; and project differentiation, among others, Bondoc added.

Here meanwhile is Colliers Philippines’ fearless forecast for next year, consolidated in its latest report entitled, “Top 10 Predictions for 2017.”

Real estate to benefit from sustained economic growth


The Philippine economy grew by 7.1 percent in the third quarter outpacing other emerging economies in Asia. We expect a full-year GDP growth of between 6.5 and 7 percent.

Colliers sees GDP growing between 6 and 6.5 percent annually over the next three years as macroeconomic fundamentals remain sound.

We expect a surge in manufacturing investments and this will further raise demand for industrial space. Firms must start developing industrial parks outside of the Cavite-Laguna-Batangas area.

Public construction will be a major source of growth as the government committed to ramp up infrastructure spending.

Private construction will continuously grow due to sustained appetite for office and retail developments while outsourcing and tourism-related activities will continue to drive the services sector.

Business process outsourcing (BPO) industry to continue driving the office market

The IT and Business Process Association of the Philippines (IBPAP) projects a compound annual growth rate (CAGR) of 8 percent in full time employees between now until 2022, with the shift to higher value services and provincial locations seen to drive growth.

We consider Cebu, Bacolod, Iloilo, Pampanga and Davao as most viable alternative locations for growth given the talent pool, business competitiveness, and local government and ICT Council support.

Major players that defined the market in 2016 include Google, Towers Watson, Wells Fargo, Pharmaceutical Product Development, among others. Colliers does not see this trend among KPOs slowing down.

 Offshore gaming to fuel demand for office space

Over 80,000 square meters of office space was taken by offshore gaming in 2016.

The Philippine Amusement and Gaming Corp. (Pagcor) launched the Philippine Off-shore Gaming Operation (Pogo) late this year, initially setting 25 licenses, with a potential to increase to 50 in the next six months.

In the last quarter of 2016, there was a surge in inquiries from offshore gaming companies, each with a minimum requirement of 10,000 sqm.

Infrastructure projects to dictate developer strategies

The infrastructure plans of the current administration will dictate the direction of real estate developments beyond the term of President Duterte.

The implementation of infrastructure projects nationwide should provide access to properties that could be redeveloped into mixed commercial, residential, hotel or leisure and industrial estates.

Colliers anticipates developers to be more aggressive in pursuing projects outside of Metro Manila as access will be significantly enhanced.

Flexible office spaces to continue expanding with a young, dynamic workforce

There is approximately 100,000 sqm occupied by flexible office space operators in Metro Manila alone, with many looking to expand next year.

The profile of tenants vary from start-ups, to law firms, Fortune 500 companies and freelancers. There are currently about 1.3 million freelancers in the Philippines.

Market leader Regus is looking to launch Spaces, its coworking alternative, to compete in the growing sub-segment. It is also considering setting up flexible workspaces in local airports.

Millennials to dictate retail spending in the country

Filipino millennials have high disposable incomes and have overtaken the baby boomers in terms of demographic size.

They are very selective in terms of products and services that they patronize. They are heavy users of “shared economy” services such as Grab, Uber, and AirBnB, and drive demand for e-commerce sites like Lazada, Zalora, SSI Online.

Developers are buildings new malls with the millennials in mind. They are starting to offer a unique tenant mix and house retailers that specifically cater to millennials.

We see developers constructing more lifestyle-oriented malls rather than retail-centric ones to differentiate themselves especially with the emergence of online shopping.

Thriving condo living to drive demand for home furnishings, accessories

Demand for home furnishings and accessories is primarily driven by an expanding middle class with incomes buoyed by BPO sector and remittances from overseas Filipino workers.

Growing local demand lures foreign brands such as Crate & Barrel, H&M Home, Pottery Barn, West Elm to set up shops. IKEA is set to enter Philippine market.

Construction delays will continue to temper growth across real estate segments

At the beginning of 2016, the projected supply of new office space was close to 900,000 sqm. This has been adjusted downwards by more than 30 percent due to project delays related to the tight labor supply in the construction sector.

Top general contractors are declining to provide their company profiles to prospective clients due to a shortage of adequately skilled workers.

We believe that private construction in 2016 could’ve been more robust if not for construction delays brought about by the lack of adequately-skilled workers. The intensified development of public infrastructure projects around the country will exacerbate this problem.

More affordable hotels to define hotels and leisure segment

The emerging segment of affordable hotels is likely to drive the market given the rising number of local entrepreneurs and domestic tourists. Colliers sees local developers expanding their hotel portfolio to cater to this market.

Colliers projects hotel occupancy rates in Metro Manila stabilizing between 65 percent and 70 percent over the next 12 months.

Foreign arrivals are estimated to reach 6.5 million, and both affordable and luxury hotels stand to benefit. Unfortunately, the growth of tourism sector is still hampered by the capacity limitations of existing airports.

The entry of more foreign hotel brands such as Grand Hyatt, Okada, and Dusit’s D2 will continue in 2017. Colliers anticipates the development of more resort hotels in tourism hubs in Visayas and Mindanao.

Fed hike to impact residential development

The US Federal Reserve raised interest rates by a quarter point in December. A series of rate increases is expected between 2017 and 2019.

The rate increase will affect residential developers as development costs would most likely increase with the rise in the cost of debt. This is apart from the rise in purchase costs of their buyers.

Colliers sees a decline in purchases from speculative investors as they are more sensitive to higher borrowing costs. Higher borrowing costs also constrict access to capital.

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We expect growth in central business district land values to be at about 5 percent.


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